Euro-to-Dollar: June 2021 Highs Forecast

Image © European Union, 2025. Photographer: Xavier Lejeune.

The Euro will rise to its highest level since 2021 against the Euro during the course of this year.

That's the finding of analysts at two major investment banks, who have adjusted their forecasts for currency markets at the halfway point of the year.

Looking forward to the second half of 2025, Nomura expects the Euro to benefit from asset allocation shifts and divergence across a combination of fiscal, monetary, and FX policies.

The call comes amidst a significant reappraisal of the U.S. economic outlook by international investors, who have turned more cautious under Trump's second presidency.

Of note, questions about the Federal Reserve's independence have been raised following numerous attacks by Trump on the Fed. His new spending and tax bill - the One Big Beautiful Bill - meanwhile, promises to expand America's debt burden, while also making a clause for special taxes on foreign investors.

And of course, there is significant uncertainty on the trade front, with tariffs rising sharply.

"U.S. trade and increasingly fiscal policy uncertainty should keep risk premia in USD rising and a US bull or twist steepening of the curve aids a weaker USD versus its peers like EUR," says Morgan Stanley in a recent G10 FX strategy update.

The relative stability in Europe, combined with Germany's commitment to invest in infrastructure and defence, sees the Euro benefit as an alternative destination for foreign investors.

"We maintain our bullish recommendation on EUR/USD," says Morgan Stanley.

Above: EUR/USD at daily intervals, looking back over a multi-year timeframe.

📈 Q2 Investment Bank Forecasts for EUR vs. USD. See the Median, Highest and Lowest Targets for the Coming Months. Request Now.

Elsewhere, Nomura says the European Central Bank's June decision "takes away from short-term dovish risks."

The ECB cut interest rates last week but said it was nearing the end of the process.

"Future cuts may become slightly harder to deliver. Eventually, further EUR strength may become a constraint via the inflation channel, but we are not close to that point yet," says Nomura.

"We forecast a rise in EUR/USD to 1.20 this year," it adds.

Morgan Stanley says the ECB meeting proved a modestly hawkish surprise as investors repriced the chances that the ECB will continue to cut rates below neutral, though analysts are "not convinced" that a hawkish ECB will necessarily drive EUR/USD higher.

Rather, "a convergence in U.S. rates is the more likely cause," explain analysts.

Morgan Stanley also targets 1.20 in The Euro-to-Dollar exchange rate.