Euro-Dollar: A Faster Push Higher, But End-point the Same says Nordea
- Written by: Gary Howes
Image © European Central Bank.
Nordea Bank has just released its latest EUR/USD forecast update, and it serves as another reminder of how quickly the FX landscape can shift when the Fed tilts dovish.
The bank now expects the Fed to keep cutting rates into year-end, with 25bp moves pencilled in for both October and December. In their words, the Fed is likely to cut "a few times more before it understands" that easing into a tight labour market with higher goods inflation is a bad idea.
That softer Fed path is the main reason Nordea has nudged its EUR/USD forecasts higher.
The currency pair already rallied hard earlier this year, moving from 1.02 in January to a peak at 1.18 by July, before stalling. During the September Fed meeting, EUR/USD briefly spiked to 1.19 before slipping back into its recent range.
On account of the Fed's intentions to cut interest rates further in coming months, Nordea lowers its forecasts for short-term U.S. bond yields.
In FX land, this translated into USD weakness, which naturally allows the Euro-Dollar to melt higher.
At the same time, Nordea thinks the European Central Bank, "will keep the deposit rate on hold for quite some time, and actually expect the next move in rates to be a hike."
The fundamentals are therefore favourable of Euro-Dollar upside and Nordea has raised its three-month target to 1.22.
The longer-term trajectory is still intact, with 2026 at 1.24 and 2027 at 1.26, but the move up is expected to be more gradual.
In practice, this means Nordea is not pursuing an ever-weaker dollar story. They’ve actually trimmed some of their assumptions about how much politics, capital flows, or slower U.S. growth will hurt the greenback.
Instead, the main driver is Fed policy itself. Investors are pricing in more cuts than Nordea thinks will ultimately materialise, so if the market reprices later, that could put EUR/USD under pressure again.
For me, the takeaway is clear: Nordea is giving credit to the euro in the near term thanks to Fed easing, but they are not turning wildly bullish.
Their end-point hasn’t changed. What has changed is the timing, with a faster push towards 1.22 now in play.
This is a classic example of how a major Scandinavian lender like Nordea shapes the institutional conversation. It’s not about chasing the hype, but about re-anchoring expectations when policy moves shift the balance.
