The eurozone economy posted solid GDP growth across all four quarters of 2025, achieving a stronger-than-forecast 1.4% for the whole year. Yes, manufacturing’s still dragging its feet, but cheaper energy bills are easing the pain. A potential truce in Ukraine might spark some optimism, and Germany’s postponed fiscal push—think infrastructure upgrades plus a bit of defence outlay—could give late 2026 growth a real boost. That said, shaky government budgets, particularly in France, keep things dicey.
More working days on the calendar will nudge 2026 GDP higher; analysts are forecasting around 1.2% expansion. Inflation is projected to slip below 2% in 2026, keeping the door partially open to further easing, if needed. With growth staying tame and prices stubborn, though, the ECB figures its 2% deposit rate hits the sweet spot right now.
The US economy has weathered the tariff storm with 2% full-year growth looking achievable. The government shutdown has disrupted the economy and could depress 4Q GDP by upwards of 1 percentage point, but much should be recovered in the 1Q GDP report now that workers and benefit recipients are receiving the money that is owed, and activity is back to normal levels.
US GDP growth for 2026 is forecasted to accelerate to around 2.0-2.6% by major institutions, rebounding from 2025’s slower pace amid fiscal tailwinds and AI-driven investments. Let’s go down deep into this blog of ForexDrift.
The European Central Bank plans to hold rates steady through much of 2026, buoyed by inflation stabilizing near 2% and modest eurozone growth. President Lagarde believes that the current interest rate of 2% is perfectly calibrated, even though the markets expect little likelihood of increases due to the Fed easing next year. Any political instability in either France or Germany, combined with weakening fiscal stimulus, may cause reductions in case negative risks occur. With inflation projections ranging between 1.9% and 2.2%, there is sufficient space left for any easing in order to ensure flexibility under the impact of outside factors, such as liquidity conditions in the US.
The forecast predicts that the Federal Reserve will gradually reduce its policy rate into the range of 3.00-3.25% in late 2026 via two moderate 25bps reductions, consistent with Goldman Sachs and iShares estimates, driven by lower inflation and stable labor market data. The rationale here is not to become too loose, considering how few cuts are implied by the Fed dots in late 2025 compared to expectations, which favors balanced economic growth rather than being overly dovish.
New Chair doubts after Powell and tariffs may slow down the process, leaving the rate above 3% in case of higher than 2.5% core PCE inflation. Still, Schwab and Forbes analyses support this floor as sustainable neutral territory, buffering USD support without sparking excess volatility.
The euro looks well-positioned to at least hold its 2025 gains, supported by our macro team’s forecast for eurozone growth in the 1.0 –1.5% quarter-on-quarter annualised range in the first half of next year and 1.7–1.8% in the second half.
With a terminal Fed policy rate of 3.25% in 2026 already priced in, the downside potential for USD rates appears to be limited. However, the implications for FX markets may persist, primarily because Fed cuts reduce the cost of hedging USD exposure via increasingly shorter-term forward tenors.
All in all, the market appears to favor the Euro upside against the dollar in 2026, with futures pointing to a potential breakout above the 1.20 key area, primarily due to the expected continued divergence in their respective monetary policy stances. However, a plethora of unknowns could turn the tide against the euro, particularly in the second half of 2026.
In the past, the pair was in a prolonged downtrend, bottoming near parity before beginning a sustained recovery. The corrective structure transitioned into a consolidation phase throughout much of 2023 and early 2024, where the pair oscillated sideways around the moving averages.
This phase was marked by repeated rejections at resistance zones but also consistent support around the 1.05–1.07 region, building a broader base before the breakout that followed.
Past performance is not a reliable indicator of future results of the EUR/USD forecast. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The recent price action has been bullish, with the EUR/USD forecast surging above the 2023 and 2024 resistance zone and reaching highs near 1.19.
Indicators suggest that momentum remains favorable for the bulls. The RSI is at 63 points toward a bullish bias but not yet overbought, leaving room for further upside. The stochastic oscillator is hovering near the upper zone around 70–80, reflecting strong buying pressure but showing potential for near-term pauses. Moving averages are now aligned bullishly, with price trading comfortably above the 50-, 100-, and 200-week MAs. The 1.15 zone serves as firm support, while resistance levels to monitor lie at 1.1870 and the psychological 1.20 barrier.
The main scenario favors a continuation of the bullish trend, with price likely to attempt a break of the 1.1870–1.20 resistance cluster. A weekly close above 1.20 could trigger further upside momentum, opening the path toward the most bullish EUR/USD price predictions from big banks, which point to 1.25 as a 2026 price target. As long as EURUSD remains above 1.15, the structure supports sustained bullish momentum with higher lows reinforcing the trend.
An alternative scenario would involve a rejection from the 1.1870–1.20 zone, leading to a corrective pullback. In that case, the first support lies at 1.1685, followed by a deeper test of 1.15. A break back below 1.15 would weaken the bullish structure and potentially return the pair to consolidation between 1.12–1.15.
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Here we look at Euro to Dollar (EUR/USD forecast) for 2026, including comments from highly rated FX strategists.
Contrary to traditional views, BNP Paribas suggests that the euro could appreciate to 1.25 by the end of 2026, maintaining a fundamentally bearish dollar stance. It points out that the US runs a persistent current account deficit while also running a substantial and growing international investment position deficit.
It also considers that the currency is still overvalued by over 20% and that there is a growing case for global investors to diversify asset holdings away from the US, which could lead to sustained dollar selling. BNP also considers that there will be a significant negative impact on the economy from tariffs, with slower underlying growth.
J.P. Morgan forecast the EUR/USD to trade around 1.20 during the year, citing that aggressive Fed rate cuts will erode real USD yields while tariff policies under President Trump will add volatility. However, eurozone inflation control supports ECB patience.
Goldman Sachs targets 1.25 by year-end 2026, betting on a structural USD reversal as global capital reallocates to higher European yields and growth differentials narrow, though French fiscal risks pose near-term hurdles.
Scotiabank analysts suggest that while the euro’s rally may face challenges above the 1.20 level, bullish trends could support further gains towards 1.22 during 2026. The main reason is the gradual appreciation of the euro as US-eurozone rate differentials narrow and global risk sentiment remains broadly constructive. At the same time, they note that the path is unlikely to be linear: periods of risk aversion or renewed US–EU trade tensions could temporarily support the US dollar and cap EUR/USD rallies.
UBS has revised its forecasts, now expecting the EUR/USD forecast to advance toward 1.20, down from 1.23 a few months ago. This projection considers the political uncertainty in France. The bank sees scope for appreciation as U.S. data weakens post-shutdown and the ECB nears the end of its easing cycle, improving the rate backdrop for the single currency.
Analysts at Wells Fargo project that the EUR/USD exchange rate will remain around 1.18 in Q1 2026 and 1.19 in Q2 2026, before easing back to 1.18 in Q3 and 1.17 again by Q4 2026. This profile implies a mid-year peak followed by a mild dollar rebound as the Fed ends its easing cycle and US yields stabilise.
ING estimates the EUR USD forecast “fair value” rising from the 1.15 area toward 1.20 and explicitly forecasts the pair at 1.21 by Q4 2026 and around 1.22 on a 12-month horizon beyond that. This is a clearly bullish scenario for the euro but assumes no major political shocks in the eurozone or the US.
The German bank forecast EUR/USD at 1.25 by the end of 2026, anchored by a rebound in global growth, a large German infrastructure program, and a potential improvement in geopolitical conditions. A recovery in Asian currencies—particularly the yen and yuan—is a key assumption behind their expectation of broad-based dollar softness.
Morgan Stanley forecasts the EUR/USD pair to close 2025 at 1.16 after an early peak near 1.23. Their bearish EUR USD forecast outlook is based on the US economic stabilization mid-year reins in dollar downside, tempered by ECB easing if inflation undershoots.
MUFG calls for 1.24 with a 5% decline in the US Dollar Index (DXY), as markets price in additional Fed cuts beyond consensus and G10 yield convergence accelerates, strengthening the euro across the board.
The EUR/USD trend depends on what stage of the cycle the global economy is at. During a recession, the demand for safe-haven assets, including the US dollar, increases. As a result, the Eurodollar often goes down. In recent years, monetary policy divergence, interest rate differentials, and geopolitical factors have also played an outsized role.
During a recovery from a recession, investors are not that focused on preserving money. Retail investors search for ways to multiply their deposits. At this stage, the fundamentals driving the EUR/USD currency pair are the GDP growth rates and, even more, the monetary policy of central banks and the expected path of interest rates. In 2024–2025, the ECB began cutting rates ahead of the Fed, reducing the euro’s yield appeal and pressuring the currency.
A strong economy means a strong currency. The rapid rebound of GDP after the recession is a reason to buy securities of the country. In particular, the belief that the US economy would avoid a hard landing in 2024–2025 and maintain a growth and yield advantage over the Eurozone accompanied a strong S&P 500 performance into 2025. As a result, alongside capital flows and wider yield spreads, the US dollar was supported.
The GDP rate is a reliable indicator, but unfortunately, lagging. The GDP report is published a month or a month and a half after the end of the quarter. Therefore, it is very difficult to determine whose economy is growing faster at a particular time, which doesn’t provide a clear picture of the current economic situation to investors. That is why forex traders have to monitor some leading macroeconomic indicators, such as the US and Eurozone PMIs, inflation, and labor market data.
The more the economy heats up, the more likely the central bank is to raise the interest rates. However, by 2025, most major central banks had already ended quantitative easing and shifted to managing the timing and pace of rate cuts. As a result, the assets denominated in the local currency grow more attractively when relative yields rise. That is why the US dollar was firm into early 2025, while growing expectations of Fed cuts later in the year have limited further gains.
To understand the Fed’s intentions, one should track such indicators as inflation and the unemployment rate. When these indicators move toward the thresholds set by the Fed, the central bank starts easing policy. In this case, the greenback may lose in value, especially if the ECB eases more slowly; conversely, if US yields remain higher, the dollar tends to stay strong.
Speeches of central bank representatives are important in forecasting the EUR/USD exchange rate. The officials’ comments give a clue on how the central banks’ policies could change, and investors could develop trading strategies based on this. Forward guidance on the rate path, balance-sheet plans, and risk assessments remains a key driver of the pair.
Rising geopolitical tensions and supply-side disruptions could also play a crucial role in shaping the USD EUR exchange rate forecast for 2026, particularly through the lens of the crude oil crisis and potential oil spike scenarios. Historically, sharp increases in oil prices tend to pressure eurozone economies more than the US due to higher import dependency, which can weaken the euro in the short term. At the same time, an oil spike can fuel inflation globally, complicating central bank policies and delaying rate cuts—factors that often lend temporary support to the US dollar. However, if elevated energy prices begin to slow US growth alongside global demand, the broader impact may still align with a softer dollar outlook over the medium term, reinforcing the current bullish bias seen in many EUR/USD projections. Read more about oil prices after the Iran attack.
In the beginning, the EUR/USD currency pair was trading below parity. However, while the euro stayed above $1,00 for two decades after 2002, it briefly fell back below parity in 2022. The euro-dollar all-time low is about 0.8230 (October 2000); the record high is close to 1.604 (July 2008).
In 2020, the global economy faced a recession, which lasted for only two months. Because of the panic in financial markets, the demand for the Greenback sharply increased. As a result, the EUR USD forecast dropped to a level of 1.064, the lowest since April 2017.
Central banks launched colossal monetary incentives of trillions of dollars to support their economies. The Fed acted very aggressively and cut its rate down from 1.75% to near 0.00% and started the Quantitative Easing at a monthly pace of $120 billion. The Federal Reserve balance sheet was growing rapidly, approaching $9 trillion, and the US dollar weakened against a basket of major currencies later in 2020. In particular, the euro ultimately advanced and reached $1.2340 in January 2021.
In late 2020, the euro was expected to rise further. Many banks suggested the EURUSD should have exceeded 1.2500 in 2021. Some aggressive bulls expected the euro to trade around $1.300. In the end, things turned out differently. Extended lockdowns in the EU, due to rising infections, had caused a double recession, and the euro lost sharp momentum again towards 1.1705.
Eventually, as infections on a global scale turned less severe, the economy was also able to rise again. Governments had turned their focus away from the Covid- 19 pandemic. Furthermore, the EURUSD buyers were again encouraged to invest in the Euro as economic data had started to improve. Fed’s unwillingness to recognize a surge in US inflation also helped the common currency back then. The pair moved towards the 1.2260 level in late May. Bulls again were aiming at 1.2500, but the FOMC June projection broke the uptrend again. The Fed started talking about a potential rate hike in 2022, which encouraged investors to buy the US dollar and set the stage for an aggressive tightening cycle.
After falling from 1.2275 at the start of 2021, EUR/USD started 2022 at 1.1375. The price rose to a high of 1.1495 in early February before steadily dropping to a low of 1.0380 on May 13 – a level last seen in January 2017. By July–October 2022, the pair broke parity for the first time in two decades, sliding to around 0.95–0.96 amid Europe’s energy shock, the war in Ukraine, and rapid Fed hikes. In 2023 and 2024, the EUR USD forecast fluctuated mostly between 1.05 and 1.12 as policy and growth differentials ebbed and flowed. In 2025, the pair has traded in a broader 1.03–1.18 range and, as of August 19, 2025, is hovering near 1.17. Know more about why do gold and silver prices rise or fall.
The pair briefly breached parity on 13 July, as markets reacted to US inflation figures. That was followed by an immediate rebound that sent EUR/USD back above 1.0100.
As of 15 July 2022, the pair has fallen over 12% year-to-date to trade around the 1.0000 level.
EUR/USD began 2022 at $1.1375, down from $1.2275 at the beginning of 2021. Early in February, the price of the pair reached a high of $1.1495 before progressively declining to a low of $1.0380 on May 13 – a level last reached in January 2017.
The pair fell below $0.99 on September 5 for the first time in 20 years as a result of Russia shutting down its main gas pipeline to the EU, severely jeopardizing the eurozone’s economic prospects.
Midway through December, the EUR/USD traded back up to around the $1.06 level due to a weaker dollar and declining US Treasury yields. The ECB increased interest rates by 50 basis points (bps) as anticipated on December 15, reiterating that more hikes will follow, and outlining plans for quantitative tightening. However, the pair benefited from a general decline in the value of the US dollar as inflationary pressures in the country continued to subside.
The euro-to-dollar exchange rate started in 2023 at $1.0703 and increased during the month of January, topping $1.08 for a brief while. During the year, the pair traded sideways, with the trading range 1.05-1.10 violated only once in July, toward 1.1280, for a short period of time.
The recent trading range, which traders had expected in 2023 and 2024, did come to an end in 2025. After such a small range, the market did break out of such a trend, with EUR/USD pushing to about $1.1666 by mid-July. Since a vacuum had built up, a sudden breakout was on the cards; by August 19, 2025, the pair was trading around $1.168-$1.171, leaving the euro over 13% higher on the year. Read about US-Iran war effects on today’s stock market.
It’s important to remember that any long-term forecasts, even the EUR/USD forecast or any other currency pair, are too unreliable to believe in. As of January 2026, EUR/USD is near 1.17, and many analyses see consolidation around 1.20 this year; still, too many factors may affect the rate of the currency pair, and it’s best to be up to date with what’s happening in the global arena in order to make realistic and reliable predictions.
If you do decide that trading this currency pair is something for you, and you believe in the future of the Euro vs. US Dollar pair, first, you need to decide on a suitable trading strategy for yourself and work it out first on a demo account, and then on a real account.
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