Euro to Dollar Forecast: EUR Edges Higher vs USD after Contrasting Sentiment Surveys

March 26, 2025 - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: EUR Edges Higher vs USD after Contrasting Sentiment Surveys

EUR/USD is slightly higher and is consolidating the large gains triggered earlier in March by the German fiscal package.

Sentiment surveys in Germany and the US were released on Tuesday. While the Ifo Index in Germany climbed to the highest reading in nearly a year, US consumer sentiment readings fell to the lowest levels since 2021.

Tuesday’s session has been slower than Monday’s when stocks made a strong recovery rally in the US, driven higher by encouraging words from President Trump who changed his tone compared to the recession talk earlier in March. Fears over fresh tariffs on April 2nd have faded as first he said he would be "flexible," then the tariffs wouldn't include cars and chips, and on Monday, "I may give a lot of countries breaks on tariffs."

The news flow has been neutral for the dollar, but EURUSD has managed to snap its 4-session losing streak with a small rally on Tuesday following the release of sentiment surveys on both sides of the Atlantic.

German Ifo Sets a Positive Tone

Tuesday’s release of the Ifo Index in Germany showed some improvements, and following on from Monday’s encouraging manufacturing PMI reading, it seems optimism is rising ahead of the fiscal stimulus package. However, that may be short-lived as the US tariff announcement is due on April 2nd and is very likely to target the EU. As ING note:

“The German economy is in the middle of two seismic activities: the just-agreed fiscal stimulus package and looming US tariffs. For the time being, the positives seem to outweigh the negatives as Germany’s most prominent leading indicator, the Ifo index, increased in March to 86.7, from 85.2 in February, its highest level since July last year.”

Both PMIs and the Ifo Index are “soft” data – surveys – and they usually lead hard data such as GDP growth. Whether this will be the case this year remains to be seen as the German economy has been stagnating around zero growth for several years now and just when the situation is finally starting to look better, tariffs may tip it into a recession, especially if auto imports are targeted. There are also some questions over how stimulative the fiscal package for infrastructure will be. Certainly, it will create jobs and have some effect, but this may not be significant or long lasting. As ING put it, “Modern infrastructure is essential for one of the world's largest economies, but it doesn't inherently drive innovation, sector transformation, or new growth opportunities.”

EURUSD is higher on Tuesday but there may be a further drift lower in the coming weeks as the sugar rush of the initial announcement of German fiscal stimulus fades.

Consumer Sentiment in US Takes Another Hit

Another sentiment survey is helping EURUSD and weighing on the US dollar as the Consumer Conference Board survey on consumer sentiment for March showed some concerning readings. The 92.9 print was below the 94.2 estimate and registered the fourth straight monthly decline. 92.9 is the lowest level since January 2021. Even worse, the consumer expectations index, which measures short-term outlooks on income, business, and labour market conditions, fell to its lowest level in 12 years, dipping just below July 2022 levels.

The overall picture shows more gloom for the all-important American consumer, following on from weak figures in February. Tariffs and high inflation expectations are clearly weighing on sentiment and spending, and the trade war is still in the very early stages. This doesn’t bode well for the rest of the year, although stocks were able to shrug off the bad news on Tuesday with marginal gains adding to Monday’s strong showing.

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TAGS: Euro Dollar Forecasts