Amundi Sees Euro-Dollar Rising in 2026 But Capped Below 1.25
- Written by: Gary Howes
Image © Adobe Images
The euro to dollar exchange rate is set to strengthen in 2026, but gains will likely remain capped below 1.25 as structural forces supporting the greenback gradually erode, according to Amundi’s latest investment outlook.
In its baseline forecast, Europe’s largest asset manager sees EUR/USD reaching 1.22 by mid-year and 1.19 by the end of 2026, up from 1.16 in November 2025.
The trajectory reflects expectations for gradual ECB rate cuts, a weaker U.S. dollar, and steady support for euro-area credit and domestic equities.
Amundi argues that the dollar’s exceptionalism narrative has run its course. While U.S. growth held up in 2025 amid AI-driven capital expenditure and deregulation, expectations have now reset, and the greenback faces multiple headwinds.
"Structural forces will continue to point to a weaker U.S. dollar," the report states, citing the return of unorthodox U.S. fiscal policies, growing Treasury supply absorbed by deregulated entities, and the risk of financial repression.
Amundi identifies four key reasons for continued dollar softness:
1. Global real yield convergence, as central banks outside the U.S. cut rates at a measured pace.
2. Suppressed U.S. real rates, as aggressive fiscal expansion and higher inflation tolerance keep nominal yields capped.
3. Weaker safe-haven appeal, with the dollar now moving more in line with risk assets during market shocks.
4. Valuation misalignment, with the USD still screening expensive versus long-term fundamentals.
In contrast, the euro is expected to benefit from subdued inflation and monetary easing by the European Central Bank, which is forecast to cut its deposit rate to 1.5% by December 2026, from 2.0% currently.
ECB easing should support eurozone small- and mid-cap equities and attract global demand for euro-denominated assets, Amundi says.
While Amundi maintains a bearish view on the dollar, it does not expect a linear decline.
Risks to the outlook include a repeat of the 2021–2022 Fed tightening cycle, which would restore the dollar’s cyclical strength.
Still, with U.S. real yields expected to fall and breakeven inflation rising, Amundi believes real return erosion will favour EUR, JPY and selected EM currencies in 2026.
Amundi’s projections place EUR/USD in a broad 1.19–1.22 range, with consensus estimates closely aligned at 1.20–1.21 by year-end.
While the firm does not foresee a breach of the psychologically important 1.25 level, it notes that foreign exchange markets are increasingly shaped by structural, not cyclical, themes.
