Euro to Dollar Forecast: 2 Factors Could Drive Additional Gains Over Next 1-3 Months

March 9, 2025 - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: 2 Factors Could Drive Additional Gains Over Next 1-3 Months

The US Dollar (USD) has remained firmly on the defensive versus the Pound Sterling (GBP) in global markets while the Euro (EUR) has made further net gains following German plans to unlock a huge fiscal stimulus.

The Pound to Dollar exchange rate (GBP/USD) has posted fresh 4-month highs just above 1.2930.

The US jobs data is likely to be pivotal in determining whether GBP/USD can test the 1.30 level today.

The Pound to Euro (GBP/EUR) exchange rate is close to 5-week lows just above the 1.1900 level amid a Euro surge.

According to Kirstine Kundby-Nielsen, FX analyst at Danske Bank, "It's all to do with the broad-based euro optimism that we've seen with this shift in fiscal policy in Germany.”

ING added on the Euro, “A major re-rating is underway.”

Economic data and the equity market performance is likely to be crucial for the dollar.

President Trump made further concessions to Canada and Mexico on Thursday, but there are increased fears that the uncertainty and frequent policy changes will undermine confidence in the economy.

The US will release the latest employment data on Friday.

Consensus forecasts are for an increase in non-farm payrolls around 160,000 for February with the unemployment rate holding at 4.0%.

Markets are, however, expecting a soft set of data even though the rash of government firings will not yet show up in the data.

ING commented, “Some fear that weather plus changes in government education funding will be a drag on the headline number. However, the impact of the DOGE government job cuts may not emerge for another couple of months.”

According to MUFG, “Given the depreciation of the dollar is down to a shift in relative macro expectations in part due to weak economic data from the US, a weak payrolls report today would certainly further extend dollar losses and harden the view that the FOMC will cut sooner than expected.”

The ECB cut interest rates on Thursday but added an extra element with comments that policy is now much less restrictive.

In this context, there were doubts whether there would be a further cut in April.

ING commented, “A pause at the next meeting to come to terms with the new macro reality now looks like a possibility.”

EUR/USD has hit 4-month highs around 1.0870 amid the Euro surge. Further gains would provide a tailwind for GBP/USD.

According to Danske Bank, “While EUR optimism from increased fiscal spending may now be largely priced in, potential catalysts such as a ceasefire deal in Ukraine or a further deterioration in the US cyclical macro outlook - especially the latter - could drive additional gains in the pair over the next 1-3M.”

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TAGS: Euro Dollar Forecasts