|

EUR/USD to trade at 1.11 in a month – Danske Bank

We are revising our EUR/USD forecast higher to reflect a material shift in the structural drivers, Danske Bank's FX analyst Frederik Romedahl reports.

Europe's fiscal reform push is beginning to support sentiment

"In our analysis of long-term trends in exchange rate markets, we look at especially three parameters: 1) the real rate parity, 2) the relative attractiveness of the asset market and 3) the outlook for global monetary conditions. In short, the outlook for building block 1 and 2 but potentially also 3) have turned. While a US recession in 2025 is not yet our base case, the probability has risen meaningfully — now priced at around 60% in prediction markets. This rising risk, alongside Trump's policy stance, poses a growing drag on the structural growth outlook for the US."

"Policies aimed at reducing immigration, cutting federal employment (e.g. DOGE), and weakening productivity dynamics are all negative for long-term US potential growth. This points to narrower real rate differentials ahead — a fundamental shift that reduces USD support. Simultaneously, there are early but clear signs of capital rotation out of US assets. If this shift proves structural — particularly a rotation away from the US tech sector — it would mark a break from the dominant investment narrative of the past decade, with USD-negative implications."

"On the EUR side, Europe's fiscal reform push is beginning to support sentiment. But the more important driver of our revised view is the growing unpredictability of US politics. With the US increasingly at odds with its allies and global institutions, we believe the relative risk premium on US assets is rising — and over time, that will weigh on the USD. In sum, we revise our EUR/USD forecast profile to 1.11 in 1M (from 1.09), 1.12 in 3M (1.08), 1.14 in 6M (1.07) and 1.14 in 12M (1.06)."

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

AUD/USD sits near a one-month top, above 0.7000 amid fresh USD selling

AUD/USD holds above 0.7000 through the Asian session, trading near a one-month high touched earlier this Monday amid renewed US Dollar selling. US bond yields decline further amid a modest pullback in crude oil prices, capping the USD recovery from a three-week low. Moreover, bets for a November RBA rate hike support the Aussie, though upside seems capped ahead of the crucial two-day FOMC meeting, starting Tuesday.

USD/JPY struggles below 157.00 on weak USD; holds above one-month low ahead of Fed, BoJ meetings

USD/JPY attracts fresh sellers during the Asian session on Monday, stalling its recovery from the lowest level since September 18, touched Friday as a further decline in US bond yields weighs on the US Dollar. Meanwhile, the Japanese Yen benefits from a more hawkish BoJ, further weighing on the currency pair. The downside, however, seems limited as traders keenly await Fed and BoJ policy meetings later this week.

Gold consolidates near $4,000 as recovery remains fragile ahead of Fed decision

Gold (XAU/USD) consolidates modest gains on Monday after last week’s sharp decline pushed the metal to $3,975, its lowest level since August. A pullback in Oil prices offers support as traders react to diplomatic efforts to ease tensions in the Middle East.

Bitcoin stalls around $80,000 as geopolitical tensions dampen risk appetite

Bitcoin hovers around $80,500 on Monday after three straight weeks of correction. Rising geopolitical tensions in the Middle East continue to push oil prices higher, stoking inflation concerns and dampening risk appetite.

Flight to safety meets a high earnings bar as central bank week begins

The final full week of October is upon us, and it is a busy one. The focus will be on updates from the five major central banks – the RBNZ, BoC, Fed, ECB, and BoJ – the UK Autumn Budget, Australian inflation, and a stretch of Q3 earnings, with a whopping 36% of S&P 500 companies reporting.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.