Euro: Downside risks for EUR against US Dollar – Rabobank
Rabobank's Senior FX Strategist Jane Foley discusses EUR/USD trading near its yearly lows despite consensus forecasts that had expected the pair around 1.18–1.20 in late 2026.
Euro (EUR) is facing potential downside risks against the US Dollar (USD), according to Rabobank's Senior FX Strategist Jane Foley. Despite consensus forecasts expecting the pair to reach around 1.18-1.20 by late 2026, markets now see a 70% chance of an October rate hike from the Federal Reserve, following a 25-basis point hike announced earlier in the month.
Rabobank's forecast for EUR/USD on a 3-month horizon stands at 1.16, while a 1-month view is 1.14. The bank attributes this shift in expectations to factors such as Iran war risks and upcoming French elections. However, they believe the EUR's strength derived from the European Central Bank (ECB) maintaining a hawkish stance has been hindered by several factors.
Foley highlights that the market has overpriced Fed tightening, leading to an inflated expectation of EUR/USD. Despite this, Rabobank maintains the view that the EUR will struggle to find upward momentum during the ongoing Iran war, prompting a revision of their 1-month forecast to 1.14 from 1.16.
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