EUR/USD: Dollar seen weakening versus Euro – BNP Paribas

FXStreet Insights Team FXStreet

BNP Paribas economists expect the United States (US) economy to grow above potential in 2026, with Gross Domestic Product (GDP) at 2.4% and inflation at 3.3%, while the Fed Funds target range is seen steady at 3.5%-3.75%. They project a gradual US Dollar (USD) depreciation against the Euro (EUR), with EUR/USD forecast at 1.21 by Q4 2026 and 1.25 by Q4 2027.

Gradual depreciation path versus Euro

"The US economy is expected to grow above its potential in 2026, with an average annual growth rate of 2.4%, a yearly improvement (up from 2.1% in 2025)."

"Inflation overshooting is set to continue (3.3% in 2026) at least through 2028, largely because of the rise in oil prices and tariffs – although the impact of these appears to be less significant than expected."

"We expect the Fed Funds target range to remain steady at 3.5% - 3.75%, with a FOMC shifting to a ‘two-sided outlook’, signaling equal readiness to implement rate hikes or cuts if warranted."

"In our base-case scenario (gradual normalisation of the Middle East situation with persistent price tensions), we expect the USD depreciation against the EUR to resume, albeit very gradually, amid broader diversification away from the dollar."

"We forecast EUR/USD to reach 1.21 by Q4 2026 and 1.25 by Q4 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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