The Euro to Dollar (EUR/USD) exchange rate spiked to highs above 1.2050 in late January amid fears over a policy of dollar debasement before losing ground and dipping to lows just below 1.1750 before trading just below 1.18 after the US Supreme Court ruled that President Trump’s IEEPA tariffs were unconstitutional.
RBC Capital Markets still sees a strong case for underlying dollar losses and has an end-2026 EUR/USD forecast of 1.20 with a further net gain to 1.24 at the end of next year.
The latest CFTC data continued to register a very substantial long Euro position, maintaining the threat of position adjustment which could prove to be a drag on EUR/USD.
RBC, however, still sees a strong case for medium-term dollar losses amid an increased hedging of US assets. Even if substantial selling of US assets is avoided, RBC expects a passive reallocation of funds away from the US which will tend to drag the currency lower, especially if there is increased confidence in the global growth outlook.
The bank also expects upward pressure on long-term yields as the Federal Reserve cuts interest rates further and this will tend to undermine the dollar.
