Analysts at Nordea expect the pair to strengthen further and forecast that EUR/USD could rise to 1.24 by the end of 2026, supported by improving global economic conditions and persistent risks surrounding US Federal Reserve monetary policy.
Nordea analysts do not expect the Federal Reserve to cut interest rates again in the near term. Moreover, based on the projected trajectory of the US economy, the bank doubts that the Fed will need to lower rates at all during 2026.
The experts note that the dollar could receive temporary support if markets abandon expectations of Fed policy easing. However, Nordea does not see this as a base-case scenario and considers it unlikely in the short term.
Instead, the bank points to potential sources of downward pressure on the dollar in 2026, primarily linked to political factors. Nordea highlights the risk of increased political influence on the Federal Reserve.
Federal Reserve Chair Jerome Powell’s term expires in May, and analysts believe that President Donald Trump may seek to appoint a more dovish successor. In addition, the US administration is likely to push for the appointment of more dovish presidents of regional Federal Reserve Banks, who rotate voting rights on interest-rate decisions.
While Nordea doubts that such moves would lead to radical changes in Fed policy, the bank argues that uncertainty and market concerns over the central bank’s independence could still exert additional pressure on the US dollar.