Bank of America has reaffirmed its outlook for the euro against the US dollar, projecting the pair to reach 1.15 by the end of 2026 and climb further to 1.20 by the end of 2027, according to its latest research report released on October 16.
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US economic fundamentals remain solid, but multiple risks cloud the dollar outlook
Bank of America noted that current US macroeconomic data remains steady, with the unemployment rate holding at around 4% and economic growth at approximately 2%, indicating that economic activity has not yet shown signs of significant deterioration.
However, the bank believes that future exchange rate movements still face risks on multiple fronts, including the ongoing Iran war and related supply shocks, potential major risks stemming from artificial intelligence technology, US fiscal challenges, renewed escalation of trade tensions, and the upcoming US midterm elections.
These factors could influence market risk appetite, inflation expectations, and investor allocation to US dollar-denominated assets.
Eurozone economic data beats expectations, energy prices remain a key risk
On the eurozone side, Bank of America pointed out that recent economic activity data has surpassed market expectations, providing some fundamental support for the euro.
At the same time, the European Central Bank continues to emphasize the importance of controlling inflation, working to maintain market confidence in its monetary policy.
Nevertheless, high energy prices could still squeeze the eurozone's economic growth space, and developments in France are also a downside risk that warrants attention in the near term.
Taking into account the economic fundamentals of both the US and Europe as well as potential risks, Bank of America has maintained its forecast of EUR/USD at 1.15 by the end of 2026 and 1.20 by the end of 2027, implying that the bank expects the euro to have further room for appreciation over the next year or so.
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