Goldman Sachs has cut its Euro to Dollar exchange rate forecasts, warning that the earlier case for sustained EUR/USD upside has weakened.

The bank now sees EUR/USD at 1.14 in three months, before falling to 1.12 on both a six- and twelve-month view. That marks a clear downgrade from the previous profile, which had looked for gains to 1.18 and 1.20.

Goldman says the FX market has shifted into a “divided Dollar environment”, with the US currency no longer expected to weaken broadly across the board.

The bank says it is now “unlikely to return to broad-based, sustained Dollar depreciation” in the near term, particularly as US asset demand remains resilient and AI-related investment spending continues to support the US growth outlook.

The report also flags a more balanced rates backdrop. Goldman still expects some narrowing in US rate differentials, but not enough to justify the previous EUR/USD upside path.

The bank adds that Dollar diversification concerns have “quieted”, while the US currency remains better supported against low-yielding currencies than against higher-carry alternatives.

For EUR/USD, the revised forecast sends a clear signal: the Euro may still find periods of support, but Goldman no longer sees the conditions for a sustained break higher.

Instead, the bank’s new 1.12 target suggests the Dollar is likely to retain more support than previously expected, especially if US data avoids a sharper downturn and rate-market expectations remain contained.