• Euro forecast to edge up to $1.16 in three months, $1.17–$1.18 in six months, and $1.18–$1.20 in a year.
  • Majority of FX strategists see dollar positioning holding steady or net longs increasing by end-July.
  • The outlook hinges on diverging monetary policy paths and inflation dynamics between the Eurozone and the U.S.

The euro is set for a gradual climb against the dollar over the next year, according to the latest Reuters poll of FX strategists, with the single currency expected to trade at $1.16 in three months, $1.17–$1.18 in six months, and $1.18–$1.20 in twelve months. The forecasts mark a slight downgrade from the June poll, which had the euro at $1.18, $1.19, and $1.20, respectively.

The dollar's near-term outlook remains resilient. In the poll, 29 of 41 strategists said dollar positioning would hold steady or see net longs increase by the end of July, while only 12 expected a decrease. This reflects a market that is still leaning toward the greenback amid lingering uncertainty over the pace of Federal Reserve rate cuts and relative U.S. economic outperformance.

"The dollar retains a yield advantage and safe-haven appeal, but the euro is gaining traction as the ECB signals a data-dependent approach," said one strategist. "The key is whether inflation in the Eurozone falls fast enough to allow rate cuts without a significant growth slowdown."

Political and policy dynamics are also in play. The ECB's future rate path—whether it cuts in the coming months or holds steady—will be pivotal. In the U.S., any signs of a softening economy could trigger a shift in dollar positioning, but for now, the consensus is a steady dollar with a slight tilt toward longs.

For corporates and investors, the modest euro appreciation implied by the poll suggests opportunities for hedging. A €100 million receivable due in six months, for instance, would yield about $1 million more if the euro moves from $1.17 to $1.18. As the poll shows, the path is not guaranteed: surprises in inflation or a shift in central bank communication could alter the trajectory.

Correction: An earlier text contained a calculation error. The correct figure is $1 million, not $1.5 million.