EUR/USD Forecast 2026: Euro to Dollar Prediction

EUR/USD accounts for nearly a quarter of all forex volume, making it the most liquid pair in the world. In 2026, it's caught between two central banks moving at different speeds.

The pair opened the year at 1.17, surged to 1.19 in January, pulled back sharply to 1.14 in March, and now sits back near 1.17. Major banks are forecasting a year-end range of 1.15 to 1.28. The spread tells you everything: nobody agrees on where this pair is going, but everyone agrees the direction depends on what the Fed does next.

In this article, we break down:

• Where will EUR/USD trade in 2026

• What are the driving forces of EUR/USD

• How will ECB monetary policy affect the euro in 2026?

• What will the Fed do to the dollar in 2026?

• What are the key EUR/USD technical levels for 2026?

• What geopolitical risks could disrupt the EUR/USD forecast?

Where Will EUR/USD Trade in 2026?

EUR/USD opened 2026 at 1.17 — up roughly 15% from the 1.019 low printed in January 2025. That rally came as the Fed began cutting and the dollar weakened across the board. The pair now trades in the 1.14–1.20 range, searching for a catalyst to break higher or reverse.

Goldman Sachs targets approximately 1.25 by year-end, driven by continued dollar weakness. J.P. Morgan forecasts 1.22. ING targets 1.22 in Q4. Scotiabank sees 1.24. The median sits around 1.23–1.24 — roughly 5–6% above current spot.

These forecasts assume the Fed delivers one to two more 25bp cuts in 2026 whilst the ECB holds at 2.00%. The rate differential, currently around 162bp, would narrow further. That compression is the core bull case for the euro.

Most banks cluster around 1.22–1.24 because the easy gains are behind us. At 1.17, the pair has already recaptured much of the ground lost since 2021. Goldman sits higher at 1.25 because their structural dollar-bearish view factors in persistent US fiscal deficits and foreign reserve diversification away from USD.

What Is Driving EUR/USD in 2026?

Four forces are shaping the euro to dollar forecast this year:

Rate differential: The ECB deposit facility rate sits at 2.00% as of April 2026, after four consecutive 25bp cuts through early 2025. The Fed funds rate stands at 3.50%–3.75% after three 25bp cuts in 2025. That leaves a 162bp gap. If the Fed cuts twice more without the ECB matching, the gap narrows to approximately 112bp. Goldman Sachs estimates each 50bp of compression adds 300–400 pips to EUR/USD.

Fair value: Goldman Sachs models where EUR/USD should trade based on economic fundamentals. For years, the euro traded below fair value. The 2025 rally closed that gap. The euro is no longer cheap – further gains require fresh catalysts, not just mean reversion.

Growth: Eurozone GDP expanded 1.24% year-on-year in Q4 2025, down from 1.63% in Q1 2025. The US has been stronger in absolute terms, but the labour market is cooling — non-farm payrolls averaged just +120k over Q1 2026 vs +180k a year earlier. Relative growth momentum matters more than absolute levels for FX.

Geopolitics: Trade tensions between the US and EU remain elevated, with tariff proposals on European goods adding uncertainty. Risk-off moves tend to boost the dollar as a safe haven, temporarily overriding rate differentials.

Every driver connects back to the rate differential. Whether it is growth divergence, central bank policy, or geopolitical shocks repricing risk — the EUR/USD trade in 2026 comes down to whether the 162bp gap compresses or widens.

How Will ECB Monetary Policy Affect the Euro in 2026?

The ECB has held its deposit facility rate at 2.00% since June 2025 — a ten-month pause after four consecutive 25bp cuts earlier that year. That pause is doing the euro a favour. Whilst the Fed has continued cutting, the ECB’s hold keeps the European side of the rate differential stable, meaning any narrowing comes from the US side.

Eurozone headline inflation fell to 1.9% in December 2025, dipping below the ECB’s 2% target for the first time since mid-2025. Core HICP (excluding food and energy) stood at 2.3%. The ECB wants core closer to 2.0% before considering any further easing. Services inflation, still above 3%, is the sticking point.

Polymarket expects no changes to rates until 11 June 2026, pricing in a 25bps increase.

A continued hold at the 2.00% floor through September would be EUR-positive. If eurozone growth deteriorates and the ECB surprises with a cut, expect the euro to weaken. Core inflation and wage growth are the key variables to watch.

What Will the Fed Do to the Dollar in 2026?

The Fed cut three times in 2025, bringing the target range to 3.50%–3.75%. Futures pricing as of April 2026 implies one to two more cuts this year, potentially bringing the rate to 3.00%–3.25% by December. Each cut the ECB does not match narrows the differential and weakens the dollar.

The complication is inflation. US core PCE printed at 3.0% year-on-year in February 2026 – above the Fed’s 2% target and higher than a year ago. That stickiness is why markets are pricing one to two cuts rather than three or four.

The labour market is sending mixed signals. Non-farm payrolls have been volatile: +178,000 in March 2026 after −133,000 in February. Unemployment stood at 4.3% in March, roughly where it has hovered since mid-2025. Soft enough to justify continued easing, but not weak enough to force aggressive cuts.

Source: Polymarket expects no further rate cuts for the remainder of the year.

If the Fed delivers two more cuts by December without a matching ECB move, the differential narrows from 162bp to roughly 112bp. Goldman Sachs estimates a 50bp narrowing adds approximately 300–400 pips to EUR/USD. That’s the path to 1.22–1.25.

What Are the Key EUR/USD Technical Levels for 2026?

EUR/USD has traded in a well-defined range since the 2025 rally stalled. The pair peaked at 1.1974 on 28 January 2026, pulled back to 1.1476 on 13 March, then recovered along a supportive trendline to the 1.17 area by late April. The 50-day EMA is acting as dynamic support, and price remains within an ascending channel from the March low.

Support levels:

• 1.1635 — Broken resistance, now support. The pair broke above this level on 8 April. First meaningful downside target.

• 1.1476 — March 2026 swing low. A decisive break below shifts sentiment bearish and targets 1.1400.

• 1.1400 — Round number and approximate 23.6% Fibonacci retracement of the 2022–2026 rally (0.9536 to 1.1974). Tested as support in Q3 2025 and held.

• 1.1200 — May 2025 pullback low and the 200-day moving average zone. A break below shifts the medium-term outlook to neutral.

Resistance levels:

• 1.1800 — Top of the wave channel since July 2025. Price has tested and failed here in April.

• 1.1837 — September 2025 high. A close above opens the path to the cycle high.

• 1.1974 — January 2026 high, the current cycle peak. A daily close above confirms a breakout.

• 1.2000 — Psychological round number and a major option barrier. Heavy gamma positioning is typically reported at this strike.

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What Geopolitical Risks Could Disrupt the EUR/USD Forecast?

The dollar’s response to geopolitical stress follows a pattern. Goldman Sachs research shows that when US growth expectations outperform the G10, the dollar rallies. When they disappoint, it weakens. Current expectations sit in the middle — the dollar is neither obviously overvalued nor cheap on a growth-adjusted basis.

US trade policy is the nearer-term risk. Tariff proposals on European goods remain on the table. If implemented at scale, they would hit Germany’s auto-export sector hardest and could shave 0.3–0.5% off eurozone GDP, pushing the euro lower. But tariffs also raise US consumer prices, complicating the Fed’s inflation fight — a potential offset.

European energy security remains a background risk. Gas prices have moderated from the 2022 crisis, but any supply disruption could revive cost pressures. The energy factor matters less than in 2022–2023, but it is not zero.

Other risks to monitor:

• China’s trajectory – a sharper-than-expected slowdown reduces European export demand, bearish for EUR

• Italian fiscal pressure – debt-to-GDP above 140%; any ratings action would weigh on the euro

• US debt ceiling – creates temporary dollar volatility as each deadline approaches

What Are the Bull and Bear Cases for EUR/USD in 2026?

The bull case sees EUR/USD reaching approximately 1.25 by year-end. The bear case targets 1.10–1.12 on macro shocks.

Bull case (EUR/USD to ~1.25):

• The Fed cuts twice more; the ECB holds at 2.00%

• Rate differential narrows from 162bp to approximately 112bp by December

• US unemployment rises above 4.5%, intensifying recession fears

• European fiscal spending (defence, infrastructure) boosts eurozone growth

• The broad dollar index extends its decline from the 2022 peak

• Goldman Sachs’ 1.25 target is reached

Bear case (EUR/USD to 1.10–1.12):

• US tariffs on EU goods trigger retaliatory measures, damaging eurozone growth

• US core PCE remains sticky above 3.0%, forcing the Fed to pause or hike

• Energy crisis resurfaces, dragging eurozone GDP into contraction

• Dollar safe-haven demand surges on a global risk-off event

• Rate differential widens back above 200bp

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Frequently Asked Questions

What is the EUR/USD forecast for 2026?

Major bank forecasts project EUR/USD between 1.15 and 1.25 in 2026. The base case targets 1.22–1.24 by year-end (J.P. Morgan 1.22, ING 1.22, Scotiabank 1.24), with Goldman Sachs at approximately 1.25. The pair opened 2026 at 1.1721 and has traded in a 1.14–1.20 range through April. The direction depends primarily on whether the Fed continues cutting whilst the ECB holds.

Will the euro go up or down against the dollar in 2026?

The base case points to gradual euro strength through 2026, driven by the Fed continuing to cut whilst the ECB holds at 2.00%. The rate differential has narrowed from over 225bp to approximately 162bp, and further compression favours the euro. Sticky US inflation or a global risk-off event could reverse this, strengthening the dollar.

What are the key support and resistance levels for EUR/USD in 2026?

Support sits at 1.1476 (March 2026 swing low), 1.1400 (23.6% Fibonacci retracement of the 2022–2026 rally), and 1.1200 (August 2025 pullback low). Resistance at 1.1837 (September 2025 high), 1.1974 (January 2026 high), and 1.2000 (psychological round number and option barrier).

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What will the ECB do with interest rates in 2026?

The ECB has held at 2.00% since June 2025 after four 25bp cuts earlier in the year. Core inflation at 2.3% remains above the ECB’s comfort zone. Markets are watching for a potential move in September or December 2026, but the ECB has signalled patience. A continued hold is EUR-positive; a surprise cut would weaken the euro.

What are the biggest risks to the EUR/USD forecast in 2026?

US tariffs on European goods (damages eurozone growth, weakens the euro), sticky US inflation keeping the Fed on hold (maintains the rate differential), a European energy supply disruption, and a global risk-off event triggering dollar safe-haven demand. Any combination could push EUR/USD toward 1.10–1.12 rather than the consensus 1.22–1.24.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Trading forex with leverage involves substantial risk of loss. Past performance is not indicative of future results. Always conduct your own research before making trading decisions.