The Euro to Dollar (EUR/USD) exchange rate is trading around 1.1415 after losing more than 2% during June and struggling to build a sustained recovery in July.

Goldman Sachs has lowered its six- and 12-month EUR/USD forecasts to 1.12, compared with previous targets of 1.18 and 1.20 respectively.

The bank expects a divided US Dollar environment, with the Greenback likely to strengthen further against lower-yielding currencies such as the Euro while losing ground against selected higher-carry currencies.

According to Goldman Sachs, the forecast revisions reflect an “ongoing divided Dollar environment” rather than an expectation of uniform Dollar gains across the foreign exchange market.

The bank expects US interest rates to remain at 3.50-3.75% for the rest of 2026, while resilient economic growth and persistent inflation should keep US yields relatively attractive.

Goldman Sachs forecasts US growth of 2.0% in 2026 and expects core PCE inflation to end the year at 3.0%, reducing the case for rapid Federal Reserve easing.

These conditions should continue to favour the Dollar against the Euro, with Goldman Sachs now expecting EUR/USD to fall towards 1.12 over both the six- and 12-month horizons.