Experts believe that the dollar will maintain its strength against the euro over the next few months and have reached this conclusion based on the greater dynamism of the US economythe expectation that the Federal Reserve maintains a more restrictive monetary policy than the European Central Bank (ECB) and the prospects for weak growth in the eurozone. This is stated by Rabobank’s Head of Strategy, Jane Foley, who has pointed out that, Although the dollar has entered a phase of long-term structural depreciation, there is still room for new rallies. «In June, the dollar index (DXY) has traded at its highest levels since last spring, raising the question of whether the dollar has entered a new phase of cyclical strengthening,» he noted. Likewise, he recalled that The conflict with Iran initially caused an increase in expectations of inflation and interest rate increasesfavoring the appreciation of currencies such as the pound sterling. Subsequently, part of that movement was reversed and, somewhat later, expectations of monetary tightening by the Federal Reserve arose. In this context, the Rabobank expert believes that The Fed will not touch rates again during 2026. And it highlights that the strength of US consumption and the attractiveness that the country’s equities continue to offer will continue to support the dollar throughout 2026.
PESSIMISM WITH THE EURO
On the other hand, the Dutch bank’s strategist maintains a much more pessimistic view on the euro. Even if a definitive peace agreement is reached between the US and Iran and the complete reopening of the Strait of Hormuz occurs, the entity considers euro unlikely to regain pre-conflict vigor anytime soongiven the low growth it forecasts for the eurozone in 2026. «In early June, the euro/dollar fell below our one-month forecast of 1.15,» said Foley, who considers that the single currency will continue to be conditioned by the weak economic prospects European.
GROWTH WILL CONTINUE TO FAVOR THE DOLLAR
Bankinter’s forecasts point in the same direction. Analyst Esther Gutiérrez de la Torre believes that «a strong economic cycle with high prices will keep the dollar appreciated,» which is why the entity maintains its forecast for the euro/dollar ratio in a range of between 1.15 and 1.20 this year and expects a slight depreciation of the dollar in 2027, to a range between 1.17 and 1.22. «The US economy will continue to grow faster than the European economysupported by a solid labor market that will sustain consumption, further reinforced by the good performance of the stock markets in a country with a high propensity to invest in equities,» explained the analyst, who has supported this statement with a fact: according to the Federal Reserve, 46% of the financial assets of American families are invested in the stock market.
Furthermore, he predicted that the deployment of Artificial Intelligence by big technology companies will continue to drive investment and will contribute to consolidating a clearly expansive cycle. «We estimate that the GDP of the United States will grow a 23% this year, against 0.8% planned for the eurozone»has highlighted
THE FED WILL DELAY THE CUTS
In terms of monetary policy, Bankinter’s research service predicts that the Federal Reserve will not begin rate cuts until 2027, once inflation has returned to levels closer to those recorded before the conflict with Iran. «We estimate that, by 2027, the CPI will have already reached its maximum»; calculates the expert, who believes that inflation will close 2026 at 3.2% and will moderate to 2.4% in 2027. In this sense, she believes that inflation at these levels and rates still located between 3.50% and 3.75% mean that the Fed will have room to soften its monetary policy
AMONG THE MOST LAGGING CURRENCIES
This view is also shared by J. Safra Sarasin Sustainable AM currency strategist Claudio Wewel, who believes that The euro will continue to perform less than most powerful currencies. «In the first half of 2026, the euro only managed to appreciate against the Swedish krona, while it lost more than 3% against the dollar and up to 6% against the Australian dollar,» he recalled. According to Wewel, while the Federal Reserve has adopted a more restrictive tone thanks to the economic boost derived from investment in artificial intelligencethe eurozone continues to face a practically stagnant growthwhich limits the ECB’s margin to maintain a more restrictive monetary policy. Regarding the Euro Zone, the analyst also warns that the prolonged closure of the Strait of Hormuz could subtract up to three tenths from GDP growth. Added to this is that the impact of the German fiscal stimulus package has not yet been fully transmitted to the economy. «The main European defense companies have a significant order book, while the Iran crisis has forced the German Government to divert part of the planned investment in infrastructure towards emergency social spending. As a consequence, we predict that the eurozone will grow by just 0.5% year-on-year in 2026,» he stated. Finally, he pointed out that the recent cooling of world stock markets responds, to a large extent, to the strengthening of the dollar after the more restrictive turn of the Federal Reserve. «Despite the drop in oil prices, Inflationary pressures are unlikely to moderate in the coming monthswhich will continue to support the dollar. At least temporarily, this scenario will continue to benefit Swiss equities and the most defensive sectors of the market,» he concluded.
