April 25, 2025 – Written by Tim Boyer
STORY LINK Euro to Dollar Forecast: US Equities “Could Drag EUR/USD to 1.1250”
The US Dollar has made some headway on Friday with gains against the Euro and across all other majors amid hopes that the US Administration is backing away from the more destabilising policy stance.
According to Scotiabank; “Technicals remain bullish given the clear sequence of higher lows and higher highs. The near-term range is roughly bound between support in the upper 1.12s and resistance around 1.1550.”
ING commented; “What we would say is that some further modest advance in US equities could drag EUR/USD back to the 1.1250 area.”
ING added; “it may be there – 1.1250 – where all the ‘structural’ dollar sellers could re-emerge if you believe Washington’s destruction of the rules-based international order has permanently damaged the dollar’s status as the leading reserve currency.”
Overall risk appetite has continued to settle on Friday amid hopes that the US can make headway on trade deals and, potentially, lower the temperature with China to some extent.
Recently, the dollar has tended to benefit when risk conditions improve.
ING commented; “Over recent weeks we had mentioned that an extreme 5-6% risk premium in the dollar could see EUR/USD briefly trade 1.15/16 – which we saw on Monday – but that risk premium is now starting to come out of the dollar as the mood music on trade improves and the President has backed Fed Chair Jerome Powell.”
There is still a high degree of uncertainty across the board, especially given White House spin.
MUFG remained cautious; “Even if reports are correct that there will be some easing of tariff rates, a hit to US growth is still coming that will ensure volatility levels remain higher, equity markets are pressured to the downside and the global backdrop remains unfavourable for any sustained move higher.”
According to Scotiabank; “Trade hopes spring eternal for markets but it is far from clear that there are grounds for any real optimism at this point. China is playing the long game and the position the US has left itself in suggests few will be rushing to make any concrete trade deals any time soon.”
Geo-political considerations will also be monitored closely with markets monitoring the Russia-Ukraine war developments closely.
The US is pushing for a rapid move towards a deal and any evidence of a credible ceasefire could underpin the Euro, but there are still major barriers to a deal.
As far as data is concerned, there was a small recovery in the April University of Michigan consumer confidence index to 52.2 from the flash reading of 50.8, but still below the March reading of 57.0.
The ECB policy stance has remained dovish with council member Holzmann stating that a 50 basis-point cut was possible for June.
Markets have now fully priced in a 25 basis-point cut at that meeting.
As far as the Federal Reserve is concerned, markets are pricing in a 60% chance of a June rate cut. Cleveland Fed President Hanmmack stated that a June cut was possible if there was clear and convincing data.
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TAGS: Euro Dollar Forecasts
