EUR/USD Stuck In Volatile But Narrow Band

The Euro to Dollar exchange rate (EUR/USD) is trading around 1.1789, little changed on the week and not far from where it started the year.

That relative calm masks what has been a volatile stretch for the pair, with sharp swings failing to produce a lasting breakout.

Rabobank’s view is that, despite the noise, EUR/USD is “going nowhere” in net terms.

Over the past week the US dollar has been the best-performing G10 currency, even after softening briefly on the US Supreme Court’s ruling on tariffs. The bank argues the explanation is straightforward: markets are positioning for potential geopolitical escalation in the Middle East, and the dollar remains the default safe haven.

This resilience has revived debate about whether the greenback has lost its defensive status after last year’s episode when US equities, Treasuries and the dollar fell together following tariff headlines.

Rabobank’s conclusion is blunt.

Liquidity in US Treasuries and the depth of dollar funding markets remain unmatched, meaning “the USD remains a safe haven, like it or not.”

That does not imply a sustained rally.

Speculative positioning has been adjusting, and investors continue to reassess hedging ratios on US assets after the dollar’s weak performance in 2025.

Greater hedging demand weighed on the currency last summer and helped lift EUR/USD above 1.20 at one stage.

Rabobank expects that urgency to fade if the dollar stabilises, limiting fresh upside for the euro.

Fed policy is another cross-current. Rabobank still sees scope for three rate cuts starting in June, though markets are less convinced after firm US labour and inflation data.

Upside surprises in price data could prompt further short covering in the dollar, but political uncertainty and leadership changes at the Fed complicate the picture.

Longer term, the de-dollarisation debate continues to simmer.

Moves by Europe and China to strengthen alternative payment systems and higher central bank gold purchases reflect a desire for greater autonomy.

Yet Rabobank argues the practical barriers are high. The dollar’s entrenched role in trade and the scale of US financial markets make a rapid shift unlikely.

In the absence of a major geopolitical shock, the bank expects EUR/USD to remain trapped in broad, volatile ranges over the coming months, digesting political headlines and shifting rate expectations rather than establishing a clear trend.