Euro-Dollar Going Well Below Parity Forecasts ABN AMRO

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The Euro downtrend will reboot and take it to below 1.0 against the U.S. Dollar.

This is the call from ABN AMRO, the Dutch multinational bank, confirming it is predicting levels far below the consensus estimate of its peers.

"We have kept our forecasts," says Georgette Boele, senior FX strategist at ABN AMRO.

Most recently, markets have bid the Euro against the Dollar amidst signs that the U.S. exceptionalism trade is fading following a run of below-consensus data prints.

Analysts say uncertainty surrounding President Donald Trump's cost-cutting measures and tariffs are weighing on sentiment and prompting a slowdown in activity.

This has encouraged markets to bet on further rate cuts at the Fed, which mechanically weighs on bond yields and the Dollar.

"Announcements and actions of the Trump Administration and uncertainty about future policy have weighed on the dollar,” Boele noted.

The Euro-Dollar has risen to a high of 1.0528 in 2025 from a low of 1.0176 on January 13, when tariff fears were at their most potent for global FX.

Boele attributed the dollar’s recent weakness to falling U.S. yields and growing market bets on Federal Reserve rate cuts.

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However, ABN AMRO's view is that the Federal Reserve will prove more hawkish than the market anticipates, and this is what ultimately matters for currency markets.

"We no longer expect rate cuts by the Fed," says Boele, explaining that expected weakness in EUR/USD reflects "our expectations on the monetary policy front (Fed and ECB)."

If correct, no change at the Fed would wrong-foot a market that is now positioned for two interest rate cuts in 2025. The rerating would imply higher bond yields and a stronger Dollar.

Rogier Quaedvlieg, Senior Economist at ABN AMRO, says:

"Disinflation has stalled, and while pressures from wages and shelter have largely subsided, the outlook compared to last month has moved towards increased upside risks stemming from both tariff and non-tariff pressures.

"The prudent approach is for the Fed to stay put."

While some analysts see EUR/USD slipping below parity earlier in the year, ABN AMRO remains one of the most bearish on the single currency.

Despite short positioning in the euro, Boele argues that the market has room to build further long dollar positions.

"We think that from a risk-reward point of view, levels below parity are a long-term opportunity to position for a recovery in the euro," she said. "This is if the environment remains relatively constructive."

ABN AMRO sticks to its call that the currency will end the year below parity—one of the most bearish forecasts among major banks.

ABN AMRO holds a forecast of 0.98 for the Euro-to-Dollar exchange rate at year-end, which is below the broader market consensus of 1.05.