Euro-Dollar: Short-term Move to 1.10 Possible
- Written by: Gary Howes
-
Image © European Union, 2025. Photographer: Xavier Lejeune.
The Euro to Dollar exchange rate is tipped to extend recent losses.
Analysts at Convera - a global foreign exchange payments firm - say the euro continues to extend losses as trade de-escalation fuels a reversal in the "sell America" trade, boosting US equities while oil prices surge.
"The inverse correlation between the euro and U.S. stocks and crude remains strong, with fading volatility adding to downside pressure on the common currency, which is now almost 5% down from recent peaks," explains George Vessey, Lead FX and Macro Strategist at Convera.
Euro-Dollar peaked at 1.1572 on April 21 as markets fretted that U.S. President Donald Trump's April 02 tariffs would stall the U.S. economy, weigh on domestic stock markets, making U.S. assets less attractive to global investors.
Get More From Your EUR/USD Transfer
Pound Sterling Live consistently delivers stronger rates than major UK banks. In July, you could have saved up to $2,135 on a €50,000 transfer thanks to our competitive pricing.
🔎 See Howi - Based on average EUR/USD rate observed in July.
However, Trump has since indicated a softening stance amidst fears of significant economic damage, culminating in a decision to row back tariffs against China to pre-April 02 levels.
But Convera thinks a rally in crude oil is also behind Euro weakness; crude prices are rising again, driven by signs that the global trade fallout may be less severe than feared.
"As a net importer of oil, Europe faces higher energy costs, weighing further on the euro if the rally continues. EUR/USD dropped 1.4% on Monday, marking its biggest daily decline since the post-US election slump, as it battles to hold above the $1.11 handle," says Vessey.
He thinks a short-term move toward $1.10 is possible, especially if the pair closes below its 50-day moving average at $1.1084.
Above: EUR/USD at daily intervals with the 50-day moving average line highlighted.
📈 Q2 Investment Bank Forecasts for EUR vs. USD. See the Median, Highest and Lowest Targets for the Coming Months. Request Now.
"Market focus may now shift back to yield differentials too. The Fed’s cautious stance favours dollar bulls, contrasting with expectations of more ECB rate cuts ahead, meaning EUR/USD may fall further in line with euro-US yield spreads. That said, US core data remains uncertain and any cyclical softening could trigger fresh dollar depreciation, particularly if Fed rate expectations adjust dovishly," he adds.
A full retracement of 2025's losses is unlikely, as some premium will surely remain; however, further gains followed by a period of consolidation are now visible.
For Euro-Dollar, this could suggest the 2025 peak won't be bothered again anytime soon, even if there is a decent chance the trend higher does resume at some point in the coming months.
Nick Kennedy, FX Strategist at Lloyds Bank, points out that Euro-Dollar has now failed at both immediate support levels (1.1274/76 and the 1.1214 line), which creates room for a deeper correction back towards 1.10.
"The market would have another opportunity to put in a base there, although the risk, if that area cracks, would be for a drop back down into the March ranges," he adds.
