ING experts see potential for euro-dollar exchange rate increase to 1.20

ING analysts believe the euro could rise to 1.20 against the dollar, but this would require significant shifts in the current economic situation. Among the potential drivers for euro appreciation, experts cited changes related to existing trade tariffs, the US budget deficit, or the Federal Reserve (Fed).

In the company’s Thursday report, analysts highlighted the impact of the weakening US currency on the euro’s exchange rate. Moreover, they pointed to the dollar’s failed recovery attempts amid geopolitical tensions in the Middle East and the subsequent spike in oil prices.

Discussing short-term factors influencing the euro-dollar pair, ING analysts noted the Fed’s cautious policy and the European Central Bank’s (ECB) less aggressive future rate cuts. This trend is expected to reduce the risk premium on the US currency and push the exchange rate toward 1.20.

Achieving this target, however, would require an additional jump in risk premiums ahead of the expiration of Donald Trump’s tariff pause. The passage of a tax bill could also provide further momentum, ING added.