Euro: Downside risks for EUR against US Dollar – Rabobank

EUR/USD: bearish near-term bias, but dependent on rate expectations and geopolitical risk. Rabobank’s view points to a wider US–euro-area rate advantage supporting the dollar: if markets continue to price a high probability of another Fed hike, higher expected US yields may weigh on EUR/USD. The bank also sees Iran-war risks and French elections as obstacles to euro gains, and has lowered its one-month forecast to 1.14 while retaining a 1.16 three-month forecast. These are forecasts, not confirmed price targets or new market-moving data.

The countercase is that Rabobank considers Fed tightening expectations excessive: any repricing toward fewer hikes could narrow the expected rate gap and relieve pressure on the euro. Traders should watch Fed communications and US data, ECB signals, developments around Iran, and French election news. The near-term skew is negative for EUR/USD, but could change if US rate-hike pricing unwinds or geopolitical risks ease.