BofA predicts euro will rise to 1.17 against US dollar by late 2025

Bank of America confirms its forecast for the euro to strengthen against the US dollar. The bank expects the currency pair to reach 1.17 by the end of 2025.

According to the organization's economists, the European Central Bank (ECB) will cut borrowing costs by 25 basis points in both September and December meetings. This will bring the deposit rate down to 1.50% by the end of the current monetary easing cycle.

BofA expects a one-year pause after that. Then, in March and June 2027, the rate will be raised by 25 basis points each, bringing borrowing costs back to 2%.

The bank notes that the current euro exchange rate appears stronger against the dollar, given its typical relationship with short-term interest rate differences between the US and the EU.

Ongoing uncertainty around US trade policy could lead to higher risk premiums on US assets in the market. This supports BofA currency strategists' bullish forecast for the euro-dollar pair through the end of 2025.