The euro-dollar has held its post-Fed gains, but Bank of America sees limited scope for a stronger near-term rally.

The Euro to Dollar exchange rate (EUR/US) tradd around 1.1579 on Monday, close to its August high of 1.1585 and around 0.2% higher for the month.

EUR/USD has recovered from June’s low near 1.1325 but remains well below January’s 1.2075 peak.

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Bank of America FX strategists say its “near-term bullish USD conviction has reduced”, although the conditions are not yet in place for a decisive bearish Dollar stance.

US data have surprised on the downside and September Fed tightening expectations have fallen sharply, but EUR/USD has still “struggled to rally further”.

The bank argues that Middle East uncertainty is part of the explanation, with elevated European gas prices “capping EUR appreciation”.

Positioning has also changed.

BofA says reduced Euro shorts mean there is now less fuel for a squeeze higher, while markets may find it difficult to price out Fed hikes completely with another round of labour-market and inflation data due before September.

Fed Chair Kevin Warsh’s Jackson Hole speech is therefore an important near-term test, with BofA expecting markets to focus closely on any clarification of the Fed’s communication strategy.

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The Exchange Rates UK Research Sentiment Survey for August 2026 remains mildly constructive beyond the near term.

BofA sees EUR/USD around 1.15 in three months, 1.17 in six months and 1.20 in twelve months.

That would leave the pair close to current levels initially, before a more meaningful Euro recovery develops further into 2027.

Exchange Rates UK Research

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