EUR/USD: USD slide may spur 2026 diversification – Rabobank

FXStreet Insights Team FXStreet

The US Dollar’s (USD) sharp H1 2025 drop could push investors toward broader portfolios, though geopolitics and Fed risks may keep the currency unsettled. Analysts now expect EUR/USD to swing widely in 2026, trimming the 12-month target to 1.18 while keeping a modestly bullish bias, Rabobank's FX analyst Jane Foley reports.

Geopolitics to drive EUR/USD volatility

"The sharpness of the USD’s plunge in H1 2025 could itself encourage investors to favour a more diversified portfolio going forward into 2026. That said, issues related to trade tensions, geopolitics, Fed independence and US growth and inflation risks can all be expected to impact the value of the greenback next year."

"Developments in all these topics have the capacity to both spook and reassure investors. With this in mind, our central view is that EUR/USD is likely to trade in wide choppy ranges in the year ahead, with only a modest upside bias."

"We have removed EUR/USD1.20 from our 12-month forecast table and instead have a 1-year forecast of 1.18, with the slight upturn in the direction reflecting the risks to the USD of a dovish FOMC and the possibility that the market could be speculating about the first ECB rate hike of the cycle by the end of next year. We have maintained our 1-to-3-month forecast of EUR/USD1.16."

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FXStreet Insights Team

FXStreet

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