Euro to Dollar Forecast: AI Stock Fears Challenge USD Strength

Modified: Monday, 26 October 2026 09:01 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: AI Stock Fears Challenge USD Strength

The Euro to Dollar exchange rate (EUR/USD) has held close to 1.1200 as renewed concerns over US artificial-intelligence stocks weaken the Dollar's momentum.

Nordea nevertheless expects further Euro losses towards 1.08 by mid-2027, arguing that US interest-rate advantages, French fiscal uncertainty and capital flows will continue to favour the Greenback, while UBS sees scope for a recovery to 1.16.

EUR/USD Forecasts: All eyes on AI

Nordea has lowered its end-2026 Euro to Dollar (EUR/USD) exchange rate forecast to 1.10 and expects losses to 1.08 by the middle of next year before a recovery takes effect.

Nordea commented; “Our dollar-positive call played out faster than expected. The question now is whether the positive USD and negative EUR drivers are fully priced, leaving EUR/USD near a bottom, or whether the dollar rally has further to run. We think it does, for three reasons.”

It expects rate differentials and political fears will undermine the Euro while net capital flows will support the dollar.

UBS, however, expects the Euro to recover; “We remain comfortable with our year-end target of 1.16 as we expect EUR/USD to recover from currently oversold levels.”

The bank added; “Europe's economy has remained resilient despite geopolitical tensions and elevated energy prices. Although French fiscal risks remain a key concern, we do not expect a broader European debt crisis.”

The Euro was undermined by fears surrounding energy prices and French debt, but the dollar was hampered by a sharp drop in yields as equities lost ground with EUR/USD holding close to 1.12.

Geo-political developments, energy markets and equities will continue to be watched very closely. US political developments will also be watched closely ahead of the mid-term elections next week.

Danske Bank now has a 12-month EUR/USD forecast of 1.10; “We see a relatively higher risk of the Fed extending the rate hikes also beyond our call, while French fiscal stress could constrain the ECB’s ability to hike rate hikes even if energy prices continue to rise. This means we expect relative rates to shift in favour of lower EUR/USD over the next 6 months.

After no change this month, there are still strong expectations that there will be a December Federal Reserve rate hike, but weakness in equities has triggered some element of doubt.

MUFG commented; “The proximity of the US midterm elections may also discourage a back-to-back rate hike. If the Democrats take control of Congress, it could contribute at the margin to a further pullback in US yields and the USD. The USD’s correction has also coincided with a moderation in investor optimism towards AI-related trades.

It added; “Strong inflows into riskier US assets have helped to support the USD alongside higher US yields and the positive terms-of-trade shock from elevated energy prices. However, heavily overweight positioning leaves the USD vulnerable to a reversal when sentiment towards AI deteriorates.”

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TAGS: Euro Dollar Forecasts