Category: Forex News, News
Euro-to-Dollar Forecast: Route To 1.20 Just Became Harder
Stronger core inflation favours MUFG’s bearish Euro outlook, with the bank now expecting a September Fed hike and EUR/USD closing below 1.16.
The Euro to Dollar (EUR/USD) exchange rate closed Friday near 1.1599, down 0.10% on the day, as stronger US core inflation reinforced expectations of a Federal Reserve rate increase.
MUFG’s downside scenario points towards 1.14, approximately 1.7% below that close.
Before Friday’s inflation release, the bank outlined two possible paths: a Fed hold alongside further ECB tightening could lift EUR/USD towards 1.20, while a September Fed hike could push it towards the bottom of its 1.14-1.18 range.
“The performance of EUR/USD may increasingly hinge on the Fed’s policy response,” MUFG’s Lee Hardman said.
Core inflation strengthens the case for a hike
The August CPI release showed core prices rising 0.3% on the month, accelerating from July’s 0.2% increase and exceeding the 0.2% consensus.
Headline prices rose 0.4%, with gasoline accounting for more than a third of the increase.
Annual core inflation nevertheless eased to 2.4% from 2.5%, making this a setback in monthly momentum rather than an acceleration across every measure.
Market estimates put the probability of a September hike around 85-90% after the release.
MUFG subsequently changed its own Fed forecast:
“As a result, we now expect the Fed to hike rates by 25bps in September.”
ECB tightening still offers the Euro support
Thursday’s ECB decision announced a quarter-point increase in the deposit rate to 2.50%, effective from 16 September, while projecting inflation above target through 2028.
That supported the argument for further European tightening explored in our earlier EUR/USD outlook.
We believe Friday’s CPI weakens the case for the Euro to benefit from an ECB tightening cycle while the Fed stands aside.
However, with a US hike already heavily anticipated, its delivery alone may offer limited additional Dollar support.
MUFG’s rates strategists acknowledge that markets have already priced in much of the expected tightening and may have gone too far.
A move towards 1.14 therefore remains conditional on how the Fed’s decision and guidance change expectations for subsequent meetings.
Euro Prices: This Week
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | +0.13% | -0.08% | -1.75% | +0.24% | +0.46% | +1.16% | +0.79% | |
| EUR | -0.13% | -0.21% | -1.87% | +0.12% | +0.33% | +1.03% | +0.67% | |
| GBP | +0.08% | +0.21% | -1.67% | +0.33% | +0.54% | +1.24% | +0.88% | |
| JPY | +1.78% | +1.91% | +1.70% | +2.03% | +2.24% | +2.96% | +2.58% | |
| CAD | -0.24% | -0.12% | -0.33% | -1.99% | +0.21% | +0.91% | +0.55% | |
| AUD | -0.46% | -0.33% | -0.54% | -2.20% | -0.21% | +0.70% | +0.33% | |
| NZD | -1.15% | -1.02% | -1.23% | -2.87% | -0.90% | -0.69% | -0.36% | |
| CHF | -0.79% | -0.66% | -0.87% | -2.52% | -0.54% | -0.33% | +0.36% |
The FX heat map compares how Euro (EUR) has performed against a basket of major currencies over the past week. The largest move was against the Japanese Yen, where Euro recorded its sharpest decline. Data comparing prices today (12/09/2026 12:07 UTC) and daily close on 05/09/2026.
To read the table, choose the base currency from the left-hand column and then move across to the quote currency along the top row. For example, the GBP row and USD column shows the weekly percentage move in GBP/USD.
Our currency coverage draws on live market data, official economic releases and published bank research.
Written by : Editorial team of BIPNs
Main team of content of bipns.com. Any type of content should be approved by us.
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