Euro-Dollar Rally Set for Reboot Says Natixis
- Written by: Gary Howes
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Natixis has told clients that the Euro-Dollar exchange rate's 2025 rally is set to resume as falling U.S. growth momentum collides with a more stable eurozone outlook.
The French bank warns that the dollar’s recent strength is unlikely to persist into the autumn, particularly if U.S. rate expectations continue to shift lower.
"Once U.S. growth starts to decelerate, we see EUR/USD pushing higher again," Natixis says in its latest research.
U.S. disinflation and softer jobs data will further reduce the premium currently enjoyed by the dollar.
Natixis highlights that a euro-dollar rebound would be reinforced if the European Central Bank adopts a slower pace of easing than the Federal Reserve.
"Markets are positioned for U.S. rates to fall faster than eurozone rates, and this differential will support the euro," says the report.
The bank projects EUR/USD rising toward 1.20 by early 2026 if U.S. growth and inflation both weaken in line with its forecasts.
As of Thursday, EUR/USD was trading at 1.1663 (+0.03 %), GBP/USD at 1.3605 (+0.04 %), and EUR/GBP at 0.8570 (+0.02 %).
Natixis cautions, however, that political risks could interrupt the rally, citing both U.S. election uncertainty and ongoing fiscal debates in Europe.
The research underlines that cyclical divergences remain the central driver, with the dollar’s safe-haven premium expected to fade.
"Over the summer months, we expect volatility to be high, but the trajectory is for a weaker dollar," the analysts write.
Natixis’ technical models show that EUR/USD needs to break resistance at 1.17 to confirm upward momentum into year-end.
The euro's prospects against sterling are more muted, with GBP/EUR expected to remain broadly range-bound as both economies face sluggish growth.
"The euro’s main opportunity is against the dollar, not the pound," says Natixis, warning that the UK’s relative resilience reduces the scope for EUR/GBP upside.
Nevertheless, analysts note that if the Bank of England cuts rates more aggressively than expected, sterling could underperform.
Commodity currencies are also seen as vulnerable if U.S. growth slows, with Natixis warning of spill-over effects from weaker global trade.
The report concludes that the second half of 2025 will be “hot” for FX markets, with euro-dollar expected to lead the action.
"EUR/USD remains the key barometer of global liquidity conditions, and we expect it to climb steadily as the U.S. cycle turns," Natixis says.
