Euro to US Dollar Forecast: Fed Capitulation to Trigger EUR/USD Spike

April 22, 2025 - Written by David Woodsmith

STORY LINK Euro to US Dollar Forecast: Fed Capitulation to Trigger EUR/USD Spike

The Euro to Dollar exchange rate (EUR/USD) strengthened to near 1.1550 in Asian trading on Tuesday before settling close to 1.1500 and below 3-year highs of 1.1570 recorded on Monday amid pressure for at least a limited correction.

Overall dollar confidence remains very fragile with Trump pressure on Fed Chair Powell remaining a key negative element for the US currency.

According to ING; “If the Fed caves to Trump’s pressure and cuts rates, the damage to the dollar might be enough to take EUR/USD to 1.20.”

Trump has continued his attack on Powell with comments that he is a "major loser".

He also demanded that he cuts interest rates immediately or risk an economic slowdown.

Clearly, the Administration is looking to blame the Fed if the economy slides towards recession.

ING commented; “The current worst-case scenario for the greenback is that Powell caves in and delivers an emergency rate cut, although that remains a low-probability event. Removing Powell from office or his resignation would have similar market effects.”


The bank was still cautious in forecasting further near-term losses; “At the same time, we must acknowledge how oversold and undervalued the dollar is, and the possibility that yesterday’s drop was exacerbated by thinner liquidity.”

It added; “The argument for stabilisation this week is quite persuasive.”

Overall confidence in the US economy and assets has been damaged with US equity markets losing further ground on Monday, although futures have rallied on Tuesday.

BlackRock commented; “We can no longer extrapolate from past trends or rely on long-term assumptions to anchor portfolios.”

According to Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia; "The longer the speculation about the independence of U.S. monetary policy continues, the longer the USD is at risk of falling."

He added; "It may take another sell-off in the U.S. government bond market or U.S. equity market to encourage President Trump to refrain from such comments."

Moody's Analytics, Mark Zandi commented; “The Trump administration’s policies are set to severely diminish the economy, not only for the next few months but for years. The administration’s trade war is undermining the global safe-haven status of the U.S., which has provided incalculable benefits, including our economy’s exceptionalism.”


There have been reports that Chinese state-backed funds have stopped making new investments in US private equity since the start of the trade war.

According to sources, China Investment Corporation (CIC) is among the state-backed funds that are pulling back as part of a broader strategic financial decoupling from the U.S.

As far as the US and Euro-Zone economies are concerned, the latest PMI business confidence data will be watched very closely on Wednesday.

Consensus forecasts are for a slight monthly deterioration for the Euro area with the manufacturing sector still firmly in contraction territory. As far as the US is concerned, a slightly larger monthly decline in expected.

A sharp downturn with the services sector in contraction territory would risk another slide in US confidence.

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TAGS: Euro Dollar Forecasts