Rabobank’s FX strategist Jane Foley argues that the sharp decline in the US dollar during the first half of 2025 may prompt investors to diversify their portfolios as they move into 2026. However, ongoing trade frictions, geopolitical tensions, questions over Federal Reserve independence, and uncertainties around US growth and inflation are all likely to keep the dollar volatile next year.
Given these mixed forces, Foley expects EUR/USD to trade in a wide, choppy range through 2026, with only a slight upside bias. As a result, Rabobank has trimmed its 12-month EUR/USD forecast from 1.20 to 1.18, reflecting the risks posed by a potentially dovish Fed and the market’s growing anticipation of an ECB rate hike by year-end. The bank’s 1- to 3-month outlook remains unchanged at 1.16.
