Analysts forecast the euro to strengthen against the dollar as US rate expectations ease and geopolitical tensions subside.
The euro is projected to climb toward 1.19 against the US dollar by the end of 2027, driven by a reassessment of Federal Reserve policy expectations. Current dollar strength, fueled by perceived hawkish Fed stance, is seen as unsustainable as markets adjust rate outlooks over coming quarters.
While euro upside remains constrained by energy-related growth risks and rate headwinds, easing US-Iran tensions could further support the single currency. Analysts argue that US rate hike expectations are overly optimistic, with inflationary pressures likely to moderate next year.
A shift in Fed focus toward growth support and potential rate cuts could weigh on the dollar, benefiting the euro. However, European Central Bank rate expectations also appear elevated, limiting near-term gains.