ING expects EUR/USD to remain supported around 1.1500 following the sharp Dollar selloff, although a sustained move above 1.1600 would require a further dovish repricing of US interest rates.

The Euro to US Dollar exchange rate (EUR/USD) gained just over 1% in July, recovering from a monthly low near 1.1354 and reaching a high around 1.1547.

EUR/USD pair remains 1.7% lower for 2026, having fallen from January’s peak at 1.2075 to a year-to-date low of 1.1325 in June.

The latest 48-hour chart above shows the pair rising from below 1.1440 to above 1.1530, leaving it close to the upper end of its recent range. The daily chart also shows EUR/USD moving back above its 20-day moving average, although it remains close to the declining 50-day average.

ING believes the sharp change in Dollar momentum leaves the Euro better supported in the near term.

The Greenback came under pressure after the Federal Reserve delivered a more dovish message than markets had expected. Investors were left questioning whether policymakers would follow through on their inflation-fighting rhetoric with actual rate increases.

The US Dollar’s decline accelerated after US core PCE inflation rose only 0.1% in June and second-quarter growth undershot expectations.

Suspected Japanese intervention against the Yen added to the pressure by triggering a sharp fall in USD/JPY and spilling over into broader Dollar sentiment.

Positioning may also keep the move going.

ING estimates that speculative long-Dollar exposure against other major currencies was at its most stretched since January 2025, while leveraged funds held their largest EUR/USD short positions since 2021.

According to the bank, “there may still be room for further USD long-squeezing”, making it too early to call a firm bottom in the Dollar selloff.

Analysts at ING note EUR/USD broke through 1.1500 “with little resistance” and expects the level to attract buyers for a while longer.

The bank sees near-term risks tilted towards further Euro gains, although it is cautious about chasing a sustained move above 1.1600.

Such a break would probably require another material repricing lower in US rates, together with an easing in Middle East tensions.

For now, ING expects buyers to continue emerging around 1.1500, with 1.1600 marking the more difficult test for the recovery.

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

Exchange Rates UK Research’s latest August 2026 survey of major investment banks suggests the Pound to Euro exchange rate is trading above where most institutions believe it will settle over the medium term.

With GBP/EUR currently at 1.1694, close to its highest level in more than a year, the majority of banks expect the exchange rate to drift back towards 1.14-1.16 through 2027.

Only a handful of institutions forecast sterling strengthening beyond 1.19.

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Latest Survey Suggests Sterling’s Outperformance May Moderate

The latest Exchange Rates UK Research poll reveals a more balanced outlook than recent price action would suggest.

Bullish forecasts from Bank of America, UBS and Credit Agricole see GBP/EUR holding between 1.18 and 1.20, implying Pound Sterling can maintain most of its recent gains.

However, the majority of banks – including Citi, CIBC, Goldman Sachs, HSBC, ING, MUFG, Natixis, Nomura, Rabobank, SEB and Scotiabank – expect the pair to ease back into the 1.12-1.16 region over the next 12 to 24 months.

Overall, the survey average points to modest Pound Sterling weakness from current levels rather than another sustained leg higher.

That outlook follows a strong rally.

GBP/EUR has climbed steadily over the past four months, rising from around 1.14 in March to almost 1.17, with July marking a third consecutive monthly gain.

The pair is now trading at its strongest levels since mid-2025 after advancing around 2.5% over the period.

BoE Advantage Narrowing as ECB Turns More Hawkish

A recurring theme across the latest forecasts is that the interest-rate advantage which has underpinned sterling may begin to narrow.

The Bank of England kept Bank Rate unchanged at 3.75% this week, but the decision was accompanied by a three-way split on the Monetary Policy Committee and fresh warnings that energy-driven inflation risks remain elevated.

Meanwhile, the European Central Bank has also paused, but policymakers continue to signal that another interest-rate increase remains possible if higher energy prices feed through into broader inflation pressures.

Eurozone inflation unexpectedly accelerated to 2.9% in July, reinforcing expectations that the ECB could tighten policy again later this year.

This has reduced expectations that UK interest rates will remain significantly above those in the Eurozone for an extended period.

GBP/EUR Outlook: Consensus Favours Gradual Retreat Rather Than Sharp Reversal

The latest Exchange Rates UK Research survey suggests the pound remains fundamentally well supported, but that much of the recent good news may already be reflected in current exchange rates.

Rather than forecasting a sharp reversal, most banks expect GBP/EUR to gradually move back towards the mid-1.10s as monetary policy differences become less pronounced and Eurozone fundamentals improve.

For businesses and holidaymakers buying euros, today’s exchange rate remains close to the strongest seen for more than a year.

If the latest survey proves accurate, these levels could represent some of the most favourable buying opportunities before GBP/EUR settles back towards longer-term equilibrium.

However, if the pair continues to drop below the 157 level, it will open the door for a continued decline toward the 152 area. This level is marked by the red dotted support line.

But the RSI indicator shows an extremely oversold condition in the short term and indicates a rebound before the next drop. A recovery above 161.50 will suggest that the bottom has formed. This bottom may allow the pair to continue upside.

In Closing

The BOJ has opened the door to another interest rate hike. Rising producer prices, strong wage growth and higher inflation expectations support the tighter policy. The weak yen also increases imported inflation. In my view, the BOJ may raise the policy rate to 1.25% in September or October. It could delay the move if inflation eases or the yen continues to recover.

The higher Japanese interest rates could place further pressure on USDJPY. A continued decline below 157 may push the pair toward the 150-152 area. But the oversold conditions could trigger the short term rebound first. A recovery above 161.50 would indicate that the bottom is confirmed and the pair is ready to move higher again.

Read more: BOJ Rate Hike to 1.25% Puts Japanese Yen in Focus