May 19, 2025 – Written by Frank Davies

STORY LINK Euro to US Dollar Forecast: EUR Price Near 1.13 Zone

US Dollar Sellers Return with a Vengeance, EUR/USD Exchange Rate Jumps to 10-Day High After US Downgrade

US assets were subjected to strong selling on Monday. Equity futures declined around 1.0% while Treasuries lost ground and the dollar index hit 10-day lows.

In this environment; the Euro to Dollar (EUR/USD) exchange rate surged to 1.1280.

According to ING; “1.1265 is the intra-day resistance EUR/USD needs to break to open the topside once again.” A break could lead to 1.1370.

Bank of America forecasts that EUR/USD will strengthen to 1.17 at the end of 2025.

According to Goldman Sachs; “Despite a somewhat brighter US outlook, we still expect the Dollar to weaken.”

The dollar has posted sharp losses following the move by ratings agency Moodys late on Friday to downgrade the US AAA credit rating.

The downgrade has come at a bad time for the dollar given the focus on US fiscal policy together with a debate over wider confidence in the currency.

According to Deutsche Bank’s George Saravelos; “the key problem for the US is that both the bond and currency markets have been insufficiently pricing in fiscal risks in the first place.”

The bank also noted the current attempts by the US Republican Congress to approve a tax bill which would put further upward pressure on the budget deficit over the medium term.

Saravelos also considers that it will be very difficult to reverse these fiscal changes during the current Presidential term.

He added; “The combination of diminished appetite to buy US assets and the rigidity of a US fiscal process that locks in very high deficits is what is making the market very nervous.”

ING commented; “Expect a risk premium to stay in the dollar this week, with investors also on the lookout for any currency references in trade deals currently being negotiated with Asia. We’ve also got a G7 Finance Ministers and Central Bank governors meeting taking place in Canada on Tuesday.

It added; “It seems very unlikely, but any changes to the FX reference in their Communique – driven by the US Treasury – would pose a big downside risk to the dollar.”

MUFG commented’ “The Moodys’ downgrade of the US sovereign rating serves as a reminder of the growing risk of foreign investors turning away to a greater degree from US Treasury securities.”

It added; “Episode of triple selling of US assets have been few and far between in recent years. Our analysis of these episodes (with 30yr yield at least 15bps higher) tend to point to further US dollar selling ahead.”

EU political developments will also be in focus with two key votes on Sunday.

Centrist mayor of Bucharest, Nicuşor Dan, is set to win Romania’s presidential election.

ING commented; “Not that it is normally a big driver of the euro exchange rate, but the outcome of the Romanian presidential election will be welcome news in Brussels as it prevents a further splintering of the bloc.”

The first round of the Polish Presidential election was potentially less comforting. Centrist Warsaw mayor Rafał Trzaskowski secured around 31.4% and radical-right historian Karol Nawrocki around 29.5%.

According to ING; “In Poland, the first round of the presidential election brought the expected candidates to the second round, but the gap between the candidates is significantly narrower than the polls suggested.”

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TAGS: Euro Dollar Forecasts

May 19, 2025 – Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Sterling Rises Amid US Credit Rating Downgrade

The Pound US Dollar exchange rate (GBP/USD) began the week with strong momentum, surging to a two-week high after the US was stripped of its AAA credit rating by Moody’s.

At the time of writing, GBP/USD was hovering around $1.3385. Up roughly 0.8% from Monday’s opening levels.

The US Dollar faced fresh selling pressure after Moody’s became the third major credit ratings agency to downgrade the United States’ long-standing AAA status, following in the footsteps of S&P in 2011 and Fitch in 2023.

The agency revised the rating down to Aa1, citing mounting concerns over the country’s growing fiscal deficit and surging debt-servicing costs. Moody’s highlighted that unless meaningful fiscal reforms are enacted, the US’s debt trajectory will remain on an unsustainable path.

Investors reacted swiftly to the downgrade, fearing it may undermine confidence in US assets. The move is seen as a warning signal about the long-term credibility of US fiscal policy, especially at a time when borrowing costs remain historically high.

Threats of fresh US fiscal and monetary risks prompted investors to scale back long-USD positions, especially as global risk appetite showed signs of recovery.

In contrast, the Pound was underpinned by optimism surrounding progress in post-Brexit trade talks between the UK and EU.

Reports suggest the UK and EU are close to finalising a new agreement that would reduce checks on agricultural goods crossing the border, in exchange for extended access to UK waters for EU fishing vessels. The deal is expected to be unveiled at a summit in London on Monday.

Investors welcomed the development, interpreting it as a potential turning point in the UK-EU relationship. A reduction in trade frictions could provide much-needed support to UK exporters and help improve the UK’s economic prospects.

Looking ahead, a speech from Bank of England (BoE) Chief Economist Huw Pill on Tuesday may shape near-term GBP movement. If Pill maintains a hawkish tone and pushes back against rate cut expectations, Sterling could build on its current gains.

At the same time, markets will be watching for further updates on UK-EU trade talks. Any confirmation of a breakthrough deal would likely extend support for the Pound.

As for the US Dollar, a lack of key economic data in the early part of the week leaves it vulnerable to sentiment-driven trade. Investors will be particularly attuned to political developments and further commentary on the credit rating downgrade.

Should concerns over US fiscal stability deepen or if additional cracks appear in investor confidence, USD could remain under pressure, potentially pushing GBP/USD higher in the days to come.

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USD/JPY Technical Analysis

The US dollar has fallen against the Japanese yen. This might be more of a risk appetite trade here, but we are hanging around this crucial 145 yen level. If we can bounce from here, the 50 day EMA is your first major resistance barrier, and then we could go looking towards the 148 yen level. We are still in the middle of a bottoming pattern from what I can see, and this is generally a very messy affair, especially against the Japanese yen. Even if we do break down from here, I’m not really looking to short this pair. I don’t want to pay the interest rate differential at the end of every night. And quite frankly, I suspect this is a short term pullback at best.

AUD/USD Technical Analysis

The Australian dollar has rallied against the dollar basically for the same reasons that the euro has, I suspect. We are sitting right here in the same consolidation. So really not that much has changed. Although as things stand heading into New York trading, it’s a reasonably strong candlestick, but it’s not as strong as one of them that we had last week, for example. So again, I don’t know that anything’s changed quite yet. We’ll have to see. But if we can break above the 0.65 level, then you have to start looking at the Australian dollar as something worth buying.

For a look at all of today’s economic events, check out our economic calendar.

• GBP/USD trades at its highest level in nearly two weeks above 1.3350.
• The selling pressure surrounding the USD fuels the pair’s leg higher.
• The technical outlook points to a bullish tilt in the near term.

GBP/USD gathers bullish momentum in the European session and trades at its highest level in nearly two weeks above 1.3350. The technical outlook suggests that the pair has more room on the upside before turning technically overbought.

The broad-based US Dollar (USD) weakness fuels GBP/USD’s rally at the beginning of the week as markets react to Moody’s downgrade of the United States’ credit rating late Friday.

Moody’s announced that it downgraded the US’ credit rating to ‘AA1’ from ‘AAA’, citing concerns about the growing $36 trillion debt pile. Moody’s explained that the fiscal proposals under considerations were unlikely to lead to a sustained, multi-year reduction in deficits, and added that it forecasts the federal debt burden to rise to about 134% of Gross Domestic Product by 2035, compared with 98% in 2024, per Reuters.

The US economic calendar will not feature any high-impact data releases in the second half of the day. Hence, investors will pay close attention to comments from Federal Reserve (Fed) officials.

The University of Michigan’s preliminary Consumer Sentiment Survey for May showed that consumers’ one-year inflation expectation jumped to 7.3% from 6.5% in April. In case Fed officials hint that they could refrain from lowering the policy rate multiple times, citing heightened concerns about the inflation outlook, the USD could gather strength against its peers and make it difficult for GBP/USD to extend its rally.

Atlanta Fed President Raphael Bostic said last Friday that he expects the Fed to lower the policy rate once this year. According to the CME FedWatch Tool, markets are currently pricing in about a 70% chance of the Fed cutting the policy rate at least twice this year.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 60, pointing to a buildup of bullish momentum. On the upside, 1.3380 (static level) aligns as immediate resistance before 1.3440 (upper limit of the latest uptrend) and 1.3500 (static level, round level).

Looking south, supports could be seen at 1.3300 (100-period Simple Moving Average (SMA), static level), 1.3270 (Fibonacci 23.6% retracement of the latest uptrend) and 1.3220 (200-period SMA).

• The USD/JPY forecast shows further dollar weakness.

• US consumer sentiment came in at 50.8 compared to expectations of 53.1.

• Trump’s tariff threats caused some uncertainty in the market.

The USD/JPY forecast shows further dollar weakness after a downgrade to the US government’s credit rating. At the same time, market participants were worried about progress on trade negotiations between the US and its trading partners. 

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The dollar fell on Friday after data revealed weak consumer sentiment. According to the report, consumer sentiment came in at 50.8 compared to expectations of 53.1. The unexpected drop revealed that consumers were still not confident in the economy. 

Moreover, the greenback started the week down against most of its peers, including the yen. This happened after Moody’s downgraded the US government’s credit rating, citing its growing debt size. This was another reason for traders to dump the dollar and buy the yen.

Furthermore, demand for the safe-haven yen increased after reports that Trump was threatening tariffs on countries that are not negotiating in good faith. The US has announced trade deals with the UK and China, which boosted sentiment. However, talks with India, Japan, and South Korea seem to have stalled. As a result, Trump’s tariff threats caused some uncertainty in the market. 

Meanwhile, BoJ policymakers are ready to keep hiking interest rates as long as the economy pushes past Trump’s tariff impacts. 

USD/JPY key events today

Market participants do not expect any key economic releases from the US and Japan.

USD/JPY technical forecast: Bears reach a pivotal support zone

On the technical side, the USD/JPY price has pulled back and is approaching its support trendline. The price trades below the 30-SMA, with the RSI under 50, indicating a bearish bias. At the same time, the price has reached the 0.618 Fib retracement level that might act as a support. 

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Therefore, USD/JPY might soon bounce higher. The price has maintained a shallow uptrend that chops through the SMA but respects the trendline. Consequently, the uptrend will continue if bulls return near the trendline support. Such an outcome would allow the price to break above the 146.02 resistance level and the 30-SMA. Bulls would likely break above the 148.51 resistance level to make a new high. 

On the other hand, a break below the trendline would signal a shift in sentiment. It would allow bears to retest the 142.55 support level.

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• EUR/USD trades in positive territory above 1.1200 on Monday.
• Fed policymakers will be delivering speeches later in the day.
• The pair could face strong resistance at 1.1270.

EUR/USD gains traction and trades in positive territory above 1.1200 to begin the new week. The pair could face a strong resistance level at 1.1270.

The selling pressure surrounding the US Dollar (USD) following Moody’s downgrade of the United States’ credit rating helps EUR/USD push higher in the European morning on Monday. The USD Index, which tracks the USD’s performance against a basket of six major currencies, was last seen losing 0.6% on the day below 100.50, pointing to a broad-based USD weakness.

Moody’s announced late Friday that it downgraded the US’ credit rating to ‘AA1’ from ‘AAA’, citing concerns about the growing $36 trillion debt pile. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s explained, per Reuters.

In the second half of the day, several Federal Reserve (Fed) policymakers will be delivering speeches.

Late last week, Atlanta Fed President Raphael Bostic said that he expects just one rate cuts this year amid uncertainty. In case Fed officials adopt a similar tone, the USD could stage a rebound and limit EUR/USD’s upside. According to the CME FedWatch Tool, markets are currently pricing in about a 70% probability of the Fed cutting the policy rate at least twice this year.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 60, reflecting a buildup of bullish momentum.

On the upside, 1.1270 (Fibonacci 38.2% retracement of the latest uptrend, 100-period Simple Moving Average (SMA), 200-period SMA) aligns as a key resistance level before 1.1300 (static level) and 1.1380 (Fibonacci 23.6% retracement).

Looking south, the first support level could be spotted at 1.1200 (static level, round level) ahead of 1.1170 (Fibonacci 50% retracement) and 1.1080 (Fibonacci 61.8% retracement).

The GBPJPY pair remains affected by the negative pressures, which forces it to fluctuate below the extra support at 193.15 level, which forces it to delay the bullish rally on the current trading, while the stability of the moving average 55 above the support at 191.50, stochastic approach from 20 level, these factors make us wait for gathering the positive momentum, then begin targeting some of the positive stations, by its rally to 194.50 and 195.30.

While the decline below 191.50 and providing a negative close will confirm its move to the bearish track, to expect suffering big losses by reaching 190.40.

The expected trading range for today is between 192.20 and 194.10

Trend forecast: Bullish

The GBPJPY pair remains affected by the negative pressures, which forces it to fluctuate below the extra support at 193.15 level, which forces it to delay the bullish rally on the current trading, while the stability of the moving average 55 above the support at 191.50, stochastic approach from 20 level, these factors make us wait for gathering the positive momentum, then begin targeting some of the positive stations, by its rally to 194.50 and 195.30.

While the decline below 191.50 and providing a negative close will confirm its move to the bearish track, to expect suffering big losses by reaching 190.40.

The expected trading range for today is between 192.20 and 194.10

Trend forecast: Bullish

May 18, 2025 – Written by Frank Davies

STORY LINK Euro to Dollar Forecast for Next Week: EUR to Extend 1.12 Consolidation

Nordea forecasts that the Euro to Dollar exchange rate (EUR/USD) will strengthen to 1.20 by the end of 2026 and would not be surprised if this level was reached much earlier than this.

ING is far from bullish on the dollar, but expects EURUSD will be held to 1.13 at the end of this year.

The EUR/USD recovered strongly from initial lows near 1.1050 during the week, but there was a fresh retreat to 1.1150 as the dollar found fresh energy.

The dollar bounced strongly following the US-China deal to lower tariffs by 115% points for the next 90 days.

Fears over dollar selling abated and defensive Euro demand also faded.

There are still important underlying concerns surrounding the dollar outlook and whether there has been long-term damage to the outlook.

According to Deutsche Bank; “The fact that China retaliated strongly to US tariffs and made no publicly known concessions to effect the reduction, highlights that we are in very different times.”

It added; “A backtracking on tariffs does not mean the importance of underlying issues has changed, merely that the approach or timing of dealing with them may have. The fundamental overproduction-overconsumption imbalance between China and the US remains large, striking and unsustainable.”

The bank considers that this has important implications; “The significance of this conclusion cannot be over-estimated. We have been arguing over the last few months that the market is reducing its willingness to fund US twin deficits,” Saravelos writes. “We worry this is brewing a major problem for the dollar and potentially the US bond market too.”

Nordea maintains a bearish dollar stance; “We think the USD will weaken even more. It is facing a trifecta of headwinds: domestic economic slowdown, political uncertainty undermining global trust and upside growth potential in Europe beyond the short term uncertainties.”

It added; “Trump’s public challenges to the Fed’s independence could undermine trust and confidence that the Fed will do its job. If investors begin to doubt the Fed’s commitment or ability to control inflation, they are likely to demand a higher risk premium to hold US assets – adding further pressure on the dollar.”

According to Berenberg; “The extremely uncertain macroeconomic environment is causing companies to postpone recruitment and investment plans. This could drive the economy into stagnation.”

The bank, however, sees little scope for rate cuts; “we believe that the interest rate cuts currently being priced in are somewhat exaggerated.”

At this stage it has a longer-term target of 1.13 for EUR/USD.

It did, however, add; “should the Fed fail to with-stand the attacks from Trump and his supporters, this would further call into question the safe-haven status of the US dollar. In combination with the risk of high US government debt and potential refinancing problems, the US dollar could continue to fall significantly in value in this scenario and reach price levels above 1.20.”

According to SocGen, there has been long-term damage to confidence; “In this instance, we know the U.S. Administration wants a weaker dollar in order to make U.S. manufacturing more competitive. We also know, and will not be able to forget, that foreign ownership of U.S. assets is excessive.

It added; “The world’s investors have too many under-hedged U.S. dollar assets in their portfolios for safety, especially given an Administration that would like to see the dollar weaker.”

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TAGS: Currency Predictions Euro Dollar Forecasts

May 16, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Forecast: Buy the Pullbacks “Below 1.32” say UBS

The Pound to Dollar exchange rate (GBP/USD) failed to hold above 1.3300 on Friday and settled just below this level.

The dollar was resilient despite another soft US data release and increased stagflation fears.

UK data next week will be important for Pound direction.

According to UBS, there is the risk of near-term weakness; “We think renewed pullbacks below 1.32 (1.30-1.32 range) are possible due to the de-escalation of the global tariff situation.

It added; “We like to use such moves to build up some GBPUSD long positions amid long-term USD concerns.”

The University of Michigan consumer confidence index retreated further to 50.8 for May from 52.2 previously and below consensus forecasts of 53.1 with current conditions and expectations components both losing ground.

According to Surveys of Consumers Director Joanne Hsu; “Many survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture – consumers continue to express somber views about the economy.”

The 1-year inflation expectations also jumped again to 7.3% from 6.5% and the highest reading since April 1981.

This combination will increase US stagflation fears and hurt dollar sentiment.

At this stage, markets are still pricing in less than a 40% chance of a July rate cut.

MUFG commented; “We still see July as quite plausible for a cut but labour market conditions will be key. We maintain that damage has been done from trade policy uncertainty already and while yesterday’s comments highlighted further the Fed’s caution in a new world of potentially frequent supply-side shocks, labour market weakness is still set to unfold which will see the Fed’s caution ease. That remains one of a number of factors that we believe will weaken the dollar further this year.”

Scotiabank noted the run of relatively weak data. It added; “This development does not bode well for the broader USD and may set the stage for renewed medium-term weakness following the countertrend recovery we’ve observed over the past few weeks.”

George Saravelos, head of forex research at Deutsche Bank expects structural vulnerability will undermine the dollar; “The U.S. cannot close its very large current account deficit unless it closes its fiscal deficit too which the U.S. appears unwilling to do.”

Hopes for stronger UK ties with the EU are providing net Pound support.

Matthew Ryan, strategist at global financial services firm Ebury commented; “Market participants will be hoping for a ‘reset’ of sorts in the relationship between Britain and the common bloc in the hope that an accord can be reached that reverses some of the damage done to trade relations.”

He added; “Signs of closer alignment between the UK and EU should be bullish for the pound.”

UBS expects the UK outlook will be crucial; “The CPI print for April and forward-looking activity indicators, such as the flash PMIs for May, will be more important. Solid wage growth could keep inflation on the elevated side, with positive activity spillover effects keeping PMIs stable, despite tariff concerns.”

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TAGS: Pound Dollar Forecasts