Market Overview
The EUR/USD exchange rate has concluded 2025 on a bearish note, with expectations of further declines as the market opens for 2026. The trading environment has been characterized by thin volumes, particularly as investors prepare for the holiday season.
Current Price Levels
The current trading range for the EUR/USD pair is noted to be between 1.1831 and a target level of 1.4193 for bearish traders. This indicates a significant downward pressure on the euro against the dollar as the new year begins.
Predictions from Investment Banks
Recent forecasts from major investment banks, including Goldman Sachs and Deutsche Bank, suggest a potential further decline in the dollar throughout the year. This outlook is largely attributed to the Federal Reserve's anticipated dovish stance, especially as other central banks are expected to increase interest rates.
Central Bank Actions
The Bank of Japan is projected to raise interest rates soon, while the European Central Bank (ECB) may follow suit with a hike by the third quarter of 2026. Other central banks, such as the Reserve Bank of Australia, the People’s Bank of China, and the Bank of England, are also expected to adopt a hawkish approach to combat inflation.
Federal Reserve's Position
In contrast, the Federal Reserve is expected to maintain a dovish tone in the coming months, particularly with the anticipated appointment of a new chair who is expected to align with this approach. The next significant event for the EUR/USD pair will be the ECB's interest rate decision scheduled for Thursday.
Analysts' Expectations
Economists generally expect the ECB to keep interest rates unchanged during the upcoming meeting, citing stability in the bloc's economy and controlled inflation levels. However, some analysts warn that the ECB may underestimate the potential economic threats posed by US tariffs, which could lead to a rate cut in March.