The Euro to Dollar (EUR/USD) exchange rate found support below 1.15 during March and has posted significant gains in April with a peak at the 1.1800 level.
After initial strength, the dollar has been undermined by hopes that there would be a resolution to the US-Iran conflict which would help bring oil prices down.
Bank of America (BoA) still expects that the Euro will register fresh short-term losses and maintains a target of at least 1.14. The bank, however, still expects renewed dollar losses later in the year with a EUR/USD target of 1.20. This forecast of dollar losses is conditional on no hikes by the Federal Reserve, a retreat in energy prices and a convergence in US-Euro area growth rates.
The bank still expects that higher energy prices will undermine the Euro during the second quarter of 2026, although widespread stagflation risks could also undermine confidence in US assets.
At this stage, the bank still expects that the Federal Reserve will cut interest rates twice this year, although it has adjusted its timing to September/October.
In contrast, it expects the ECB will increase interest rates twice to keep inflation under control.
