• Reuters (NASDAQ:TRI) FX strategists lowered near-term euro forecasts, signaling expectations for a stronger US dollar.
  • EUR/USD targets cut to $1.13 for three months and $1.14 for six months, while the 12-month view remains $1.16.
  • A modest majority of polled strategists (17 of 30) believe the dollar is more likely to outperform over the next three months.

A More Resilient Dollar

Foreign-exchange strategists have trimmed their near-term expectations for the euro, according to a Reuters poll, underscoring a growing conviction that the US dollar will hold its ground in the coming months. The survey lowered the three-month EUR/USD forecast to $1.13 from $1.15 and the six-month target to $1.14 from $1.15, while leaving the 12-month projection unchanged at $1.16. The adjustments reflect a recognition that the dollar’s strength may persist longer than previously anticipated, even as the longer-term outlook for a euro recovery remains intact.

In a further sign of shifting sentiment, 17 of 30 strategists surveyed said the dollar is more likely to outperform their forecasts over the next three months. That represents a modest majority—roughly 57%—and is not a probability of dollar appreciation, but it highlights the cautious mood surrounding the euro. The poll results come as EUR/USD trades near $1.12, weighed down by energy-price pressures, French fiscal concerns, and uncertainty over US monetary policy ahead of the November 3 midterm elections.

Policy Divergence and Fiscal Headwinds

The euro has faced a confluence of negative factors. The European Central Bank and the Federal Reserve both left rates unchanged in late October, but inflation remains a concern on both sides of the Atlantic. The ECB has warned of rising inflation risks, while stronger US inflation data have reinforced expectations of a December Fed rate increase. The relative path of interest rates—not simply whether either central bank moves—remains a key driver for currencies. Higher US rates tend to support the dollar by making dollar-denominated assets more attractive.

Energy costs are another vulnerability for Europe. The Iran conflict and associated energy-price pressures have weighed on the euro, given the euro area’s heavy reliance on imported energy. Falling oil prices on November 2 offered some relief, but the underlying risk remains. Meanwhile, Fitch’s revision of France’s outlook to negative from stable, citing worsening debt dynamics, has added a euro-area fiscal concern to the mix. The combination of energy insecurity and fiscal fragility in one of the bloc’s largest economies has dampened appetite for the single currency.

Political Uncertainty Adds to the Mix

Investors are also watching the US midterm elections, which could alter the scope for federal spending and other fiscal measures. Markets were positioning ahead of the vote, not reacting to a known result, adding an element of uncertainty that has historically benefited the dollar as a safe-haven asset. “The dollar tends to strengthen when political uncertainty rises, and this time is no different,” said one strategist, who spoke on condition of anonymity.

Despite the near-term headwinds, the euro’s longer-term prospects are not uniformly bleak. November 2 manufacturing data showed continued expansion in the euro area despite tariffs, conflict, and energy costs. However, rising input prices and supply bottlenecks create an uncomfortable combination: pressure on company margins and pressure on the ECB to tighten policy further. That could eventually support the euro, but for now, the market is focused on the dollar’s resilience.

What It Means for Households and Businesses

A stronger dollar has wide-ranging implications. Euro-area households and importers will see dollar-priced energy and other imports become more expensive in euros, adding to purchasing-power pressure. European exporters, on the other hand, may find their goods more competitive abroad, although imported inputs and energy costs can offset the benefit. US consumers and travelers stand to gain, as European goods and travel become cheaper in dollar terms. US exporters and multinationals, however, may face weaker overseas competitiveness, and euro earnings will translate into fewer dollars.

Borrowers with dollar debt but non-dollar income will find debt service more burdensome in local-currency terms. The immediate European concern is the interaction between imported energy inflation and higher borrowing costs, both of which are highlighted in current reporting.

A Contested Outlook

The revision follows a persistent forecasting problem. In its October poll, Reuters reported that strategists had underestimated the dollar’s strength in their three-month forecasts for nine consecutive months. The dollar had rallied more than 3% since early September, yet forecasters still expected it to surrender most of those gains over the following year. That earlier poll also found an 80% majority expecting the dollar to beat their three-month forecasts. The new 17-of-30 result still points to upside dollar risk, but the percentages should not be treated as a clean change in sentiment without confirming identical questions and respondent groups.

Other central banks matter too: markets are watching decisions in Britain, Australia, Norway, and Sweden, making this a broader repricing of global interest-rate expectations rather than solely a US–euro-area story. There is also a competing euro-recovery argument. UBS (NYSE:UBS) has argued that the euro’s decline went further than European fundamentals warranted and projected a recovery toward $1.16. That illustrates disagreement over whether current prices already incorporate too much bad news for Europe.

In the short term, US election outcomes, labor-market and inflation releases, oil prices, and December rate expectations are the clearest catalysts. Continued strong US data or renewed energy disruption could support the dollar; softer US data or easing energy pressures could help the euro. These are conditional scenarios, not assured outcomes. Over six to twelve months, the unchanged $1.16 target suggests forecasters still expect the dollar’s recent advantages to fade. The main limitation is their recent record: repeated underestimation of dollar strength makes that recovery path less convincing than the precision of the point forecasts might suggest.

Correction: An earlier version of this article misstated the percentage of strategists expecting the dollar to outperform. It is 17 of 30, or approximately 57%, not 80%.