Rabobank's Senior FX Strategist Jane Foley highlights that EUR/USD is trading near its yearly lows, diverging from earlier consensus forecasts which had anticipated the pair to reach 1.18–1.20 by late 2026 [1]. Foley notes that markets have significantly repriced expectations for US Federal Reserve policy, now assigning a 70% probability to an additional rate hike in October following a 25-basis-point increase earlier this month [1]. This shift in Fed expectations has bolstered the US Dollar and weighed on the Euro, undermining the latter's ability to benefit from the European Central Bank's hawkish tone [1].
Rabobank has revised its EUR/USD forecasts downward, projecting the pair at 1.16 over a three-month horizon and 1.14 over a one-month period, citing ongoing risks from the Iran war and the upcoming French elections as key factors limiting Euro strength [1]. Foley asserts that the market has priced in excessive Fed tightening, but geopolitical uncertainties and domestic European political events are likely to keep the Euro under pressure in the near term [1].
The analysis suggests that the Euro will struggle to gain upside momentum during the duration of the Iran war, and Rabobank has adjusted its one-month forecast from 1.16 to 1.14 to reflect these risks [1]. No specific market reactions or analyst opinions beyond Rabobank's forecasts are mentioned in the article [1].
CONCLUSION
Rabobank expects continued downside for the Euro against the US Dollar, driven by aggressive Fed tightening expectations and geopolitical risks. Their revised forecasts indicate further weakness in EUR/USD over the next one to three months. Investors should remain cautious as geopolitical and political uncertainties persist.