Rabobank expects limited upside for the euro as markets price in another ECB hike and political risks weigh on momentum.
EUR/USD is forecast to trade sideways near current levels over the next three months, as sentiment cools following a surge in Q2 2025. Markets have already priced in another European Central Bank rate hike, limiting further support for the currency.
The euro was the second-best performing G10 currency in Q2 2025, trailing only the Swiss franc, but momentum has since faded. Political risks and structural headwinds are now capping gains, with investors reluctant to rebuild large long positions.
While the dollar has benefited from U.S. economic resilience, expectations of Federal Reserve rate cuts may curb its strength. A modest upward bias for EUR/USD is seen emerging in the 3-to-6-month horizon.