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Dollar · ECB · Euro · Fed
RBC Capital Markets strategists project the Euro will strengthen to $1.24 by late 2026 from its current $1.1759, driven by the European Central Bank maintaining steady rates while the Federal Reserve implements further rate reductions.
RBC's forecast is based on the ECB holding rates unchanged for an extended period, supported by a resilient eurozone growth outlook, despite market pricing in some risk of an additional ECB cut. Conversely, the Federal Reserve has resumed rate cuts and signaled more are forthcoming, making dollar hedging cheaper and shifting capital flows from U.S. assets to Europe.
A stronger Euro, as predicted by RBC, is expected to ease inflation pressures, thereby limiting the need for future ECB rate cuts. This policy stability attracts capital inflows into European assets, but a stronger currency also weighs on exporters, creating a mixed impact on European equities.
