Euro-Dollar is likely to stay volatile around 1.15-1.16 through the coming months, with Rabobank seeing fading Fed hike bets offset by Dollar safe-haven demand.
Foreign exchange analysts at Rabobank have raised its one-month Euro to Dollar forecast to 1.15 from 1.14, but still see little prospect of a clean breakout from the pair’s recent range.
The Euro to US Dollar (EUR/USD) exchange rate was trading around 1.1529 late on Thursday, close to where it began August.
The pair has spent the past 48 hours between roughly 1.1514 and 1.1562, with the latest price towards the lower third of that range.
EUR/USD has struggled to sustain moves above 1.1550, with price action remaining contained inside a relatively narrow 48-hour range.
The US Dollar side of the equation remains complicated.
Rabobank argues that the traditional inverse relationship between oil and the US currency has weakened as the US has become a major energy exporter.
That shift helped the Dollar recover some of its safe-haven appeal when the Iran war began.
More recently, however, interest-rate expectations have taken over as the more important driver.
Rabobank said the earlier oil-Dollar relationship “appeared to break down in June”, adding that this was “likely linked to a run up in market speculation regarding the prospects of Fed rate hikes”.
Those expectations have since softened.
July US CPI matched forecasts, but the market still pared back some expectations for another Federal Reserve rate increase.
The softer payrolls report released beforehand also shaped the reaction, with weaker employment reducing concern over second-round inflation pressures.
“If Fed rate hike speculation continues to be pared back, in line with RaboResearch’s view, the USD will be exposed to potential downside pressures,” the bank said.
That is not quite the same as an outright bearish Dollar call.
Rabobank still sees uncertainty surrounding the Strait of Hormuz as an important source of USD support.
It argues that as long as shipping remains curtailed, the Dollar should retain a safe-haven premium, while the Eurozone remains more vulnerable to the growth and inflation consequences of expensive energy.
“For as long as shipping through the Strait of Hormuz is curtailed, the USD is likely to retain a safe haven premium, supported by the US’s energy exporter status,” Rabobank said.
EUR/USD Outlook: Range First, Breakout Later?
The bank therefore expects two competing forces to keep EUR/USD unsettled rather than drive a sustained directional move.
Lower Fed hike expectations favour a softer Dollar. Energy and geopolitical risks work the other way, particularly because they make investors less willing to rebuild large Euro positions.
Rabobank concludes that “choppy range trading” should dominate through the rest of 2026, with only a modest medium-term upward bias.
Its one-month EUR/USD forecast has been lifted to 1.15 from 1.14, while the bank expects the 1.15-1.16 area to dominate on a three-to-six-month view.
The broader bank consensus becomes progressively more Euro-positive through 2027, although the forecast range widens substantially further out.
That makes Rabobank noticeably restrained relative to the longer-run consensus.
The bank is not ruling out further Euro gains, but neither falling Fed expectations nor current Dollar weakness are enough to persuade it that EUR/USD is ready for a sustained break higher.
For the time being, 1.15-1.16 is less a target than the battleground.
