July 7, 2025 – Written by Frank Davies
STORY LINK Euro to Dollar Forecast: “EURUSD to End 2025 Closer to 1.10”
Goldman Sachs has a 12-month Euro to Dollar exchange rate (EUR/USD) forecast of 1.25 as net dollar losses continue at a slightly slower pace.
BNY Mellon remains cautious over the Euro and noted; “we lean toward EURUSD ending the year closer to 1.10, rather than making a sustained attempt at 1.20.”
After surging to 45-month highs around 1.1830 early in the week, EUR/USD consolidated around 1.1780.
Trade developments and fiscal chatter will be big influences during the week with high volatility even if the Federal Reserve story is in temporary abeyance. If Trump is back on the warpath against Fed hair Powell. Volatility is liable to spike even higher.
The headline US employment report was stronger than expected with an increase in non-farm payrolls of 147,000 for June compared with consensus forecasts of around 110,000.
The headline figure, however, was inflated by a big increase of over 70,000 in government jobs while ADP data reported a 33,000 decline in private jobs for June.
Overall, markets ruled out the potential for a July Fed rate cut with the chances of a September cut dipping to around 80%.
The issue of Fed independence will remain a key market theme amid President Trump’s threats to sack Powell or nominate an early candidate to take over in May 2026.
Rabobank commented; “Crucially, if any replacement for Powell was judged to be at risk of medium-term inflation stability by cutting rates too fast and too soon, the USD could be faced with a steeper decline.”
As far as fiscal policy is concerned, the Senate passed the budget bill as Vice-President Vance provided the tie breaker after a 50-50 vote.
The House also approved the Bill with a small majority and the bill has been signed into law by Trump.
The Congressional Budget Office (CBO) has estimated that the Bill will increase government debt by $3.3trn over 10 years. The Treasury market will be watched closely in the short term.
Trade developments will also be a key element in the week ahead. Ahead of the July 9th deadline, Trump is planning to announce take it or leave it tariff levels for the rest of the world.
ING noted; “Needless to say this could be a noisy period for FX markets as the White House again makes heavy threats in order to get trade deals over the line.”
The bank added; “As a reminder, the top G10 FX performers during the worst of April’s volatility were the Swiss franc, the euro and the yen – in that order. The dollar was broadly offered. And yesterday’s FX price action suggests investors and corporates were more than happy to sell dollars into rallies.”
Euro-Zone developments will also have a key influence.
CIBC notes ECB support for a greater Euro role as a reserve currency.
It added; “While some ECB members may soon become nervous regarding the pace of EUR appreciation, we would still view the currency as being on the cheap side of relative fair value, which we would estimate to be around €1.30.”
Goldman is confident that there will be further inflows, but added; “absent a growing list of reasons to reallocate away from the US, the pace of the inflows to Europe could taper off slightly as they did in 2017, which may imply a slightly slower and choppier path higher for EUR/USD from here.”
BNY Mellon considers the Euro-Zone deflation threat could return; “We foresee a more difficult road ahead in H2 2025, with business cycle indicators struggling to generate any momentum. This will increase the likelihood of renewed ECB easing or at least a more defensive stance. Meanwhile, structural reforms will take time, and hard data will likely fall short of what is currently priced in.”
Like this piece? Please share with your friends and colleagues:
International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.
TAGS: Euro Dollar Forecasts
