The euro’s recovery against the dollar has strengthened, but Bank of America still sees scope for a near-term pullback.

The Euro to US Dollar exchange rate (EUR/USD) slipped to around 1.1504 on Monday after opening near 1.1548, leaving the pair at the bottom of its intraday range.

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EUR/USD ended July around 1.1530, having recovered from a monthly low near 1.1354.

The pair remains 1.7% lower for 2026, with this year’s trading range extending from 1.1325 to 1.2075.

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Bank of America says the July Fed press conference “injected uncertainty around the Fed’s inflation-fighting commitment and reaction function”.

The bank described the meeting as “doved and confused”, with Chair Kevin Warsh suggesting that financial markets had already delivered some of the tightening that might otherwise have required higher rates.

BofA said this was “not reassuring”, adding that the Dollar should respond differently to “a central bank credibly doing the tightening” than one which “outsources the tightening to the market”.

That credibility concern has shifted the near-term risk balance against the Dollar. However, BofA still sees support from resilient US economic conditions, artificial-intelligence investment and geopolitical uncertainty.

The bank also believes the Fed may ultimately need to respond more forcefully.

“Ironically, we think the need to re-establish credibility increases the probability that the Fed will hike in September,” BofA said.

Its economists continue to forecast three 25-basis-point increases over the remaining meetings of 2026.

BofA forecasts EUR/USD at 1.12 in September, 1.15 at year-end and 1.20 by the end of 2027.

The Euro’s technical recovery has improved after the late-July surge, but 1.1500 remains the immediate test.

A sustained hold above it would keep 1.1555 and 1.1600 in view, while a renewed break lower would expose 1.1450 and the 1.1370 area.

Exchange Rates UK Research

Our currency coverage draws on live market data, official economic releases and published bank research.