End-2026 EUR/USD Forecast 1.10
The Euro to Dollar (EUR/USD) exchange rate dipped sharply to 7-month lows near 1.1400 in the second week of March amid the spike in energy prices before rallying to near 1.16 as traders bet on a more aggressive ECB policy.
The bank expects EUR/USD losses over the next 6-9 months with a slide to 1.10 as the spike in energy prices saps support. The bank, however, is backing gains to 1.17 by the end of 2027 as the Fed cuts rates.
Middle East developments and the outlook for energy prices will inevitably dominate in the short term and there is inevitably a high degree of uncertainty.
At this stage, markets are now pricing in at least two ECB rate hikes this year with a potential first move at the April meeting to combat an increase in the inflation rate.
Credit Agricole considers that these expectations are too aggressive and is still backing no change in rates which would imply a shift in yield spreads in favour of the dollar.
As far as the US is concerned, markets consider the most likely outcome is for no change in rates this year. Credit Agricole is broadly in agreement, but does expect rates will be cut next year which would hurt the dollar.
