Modified: Monday, 23 February 2026 11:31 BST

– Written by


Frank Davies

STORY LINK Euro to Dollar Forecast: EUR/USD Steady After US Tariffs Struck Down

The Euro to Dollar exchange rate (EUR/USD) held firm near 1.18 after volatile trading triggered by a US Supreme Court ruling that struck down President Trump’s proposed reciprocal tariffs.

While the dollar initially drew support from geopolitical tensions and firmer oil prices, the legal setback to tariff policy has complicated the outlook for US trade strategy and added to broader structural concerns weighing on the greenback.

EUR/USD Forecast: US tariffs struck down

Danske Bank forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.25 on a 12-month view.

The dollar gained net support from increased speculation that the US would launch a military strike against Iran as oil prices strengthened.

There was, however, choppy trading on Friday as the US Supreme Court ruled against President Trump’s reciprocal tariffs with EUR/USD around 1.18 from lows just below 1.1750.

Fed policy will remain a key overall element, especially with changes to the Board.

Danske Bank commented; “Warsh’s Fed chair nomination has calmed independence fears, immigration policy rhetoric has eased, and tariff threats have diminished. At the same time, monetary policy divergence has emerged as a key theme.”

According to Commerzbank; “the market could question the more than two Fed rate cuts that are currently discounted for this year with yields testing the upside.”

There is still speculation that the dollar will face structural barriers.

Danske Bank discussed potential risks to the outlook; “If the capital rotation out of US assets continues and a sharp US recession hit, EUR/USD could break substantially higher than our forecast suggests. In this environment, commodity currencies would also face a larger hit.”

It added; Conversely, persistent resilient US data and/or renewed euro area weakness that could prompt the ECB to cut again this year could keep the USD stronger-for-longer.

Scotiabank sees dollar headwinds; “We continue to expect broad-based weakness in the USD against all of the major developed economy currencies. The weak USD forecast extends through 2026 and into the end of our forecast horizon at the end of 2027, reflecting an outlook for relative central bank policy that includes near-term Fed easing and steady policy settings for the Fed’s peers.”

RBC Capital Markets takes a similar view “We continue to expect further US dollar weakness, mainly as US stocks and US rates are showing considerable underperformance vs European and Global benchmarks. This underperformance is materially surprising given that US growth continues to be quite strong and some of the best in the world.”

RBC added; “we note the cost of hedging USD assets back to EUR is in the bottom 25% percentile since 2022.”

During the week, there was some chatter that ECB President Lagarde would leave her post before the end of her 8-year term.

MUFG commented; “while all of the speculation on who takes over could be market-moving, a divergence of inflation relative to the target will still be more important in shaping the direction of monetary policy rather than who becomes President.”

According to Standard Chartered; “The ECB appears to have concluded its rate-cut cycle. The EUR should benefit from improved investor confidence and resilient trade data to trade near 1.21.”

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TAGS: Euro Dollar Forecasts