EUR/USD forecast: ECB and US data to provide final test for 2025

It’s a busy stretch for global markets, with multiple macro catalysts converging at once. Lots of central banks are meeting in Europe, including the European Central Bank, while from the US we have CPI and jobless claims to look forward to. These events will put the EUR/USD forecast firmly in focus, as investors start to look forward to 2026.

 

 

ECB preview: Bar for policy adjustment high

 

The threshold for any policy shift from the European Central Bank remains firmly elevated, yet talk of a rate hike in 2026 is premature. The ECB is expected to lean once again on its familiar “good place” narrative at today’s meeting, leaving both rates and forward guidance unchanged. However, recent market repricing towards the prospect of a rate cut next year will put greater focus on the updated staff projections, broader communication and the Q&A at President Christine Lagarde’s press conference. While the ECB will maintain its data-dependent stance, Lagarde may subtly signal that policy rates are likely to remain on hold for an extended period.

 

Watch out for some changes in the ECB’s forecast. I anticipate upward revisions to the central bank’s economic growth forecasts following the slight improvement in survey-based, forward-looking, data and the recent upside surprise in GDP. CPI inflation projections may well be nudged lower thanks to softer energy prices.

 

Even so, the ECB appears comfortable with its current policy stance and with market pricing that implies stable rates through next year. The bar for any policy adjustment at forthcoming meetings in early parts of 2026 will be high. But any downside risks to inflation dominating next year, then talks of a rate cut would resurface. A stronger euro should weigh on imported inflation too.

 

US CPI: important, but far from decisive

 

After the ECB rate decision, attention will quickly shift to US inflation data, before the ECB press conference starts. Disruptions related to the government shutdown have affected data collection, meaning this CPI print offers a less complete picture than usual. Several monthly components are either missing or delayed, limiting the conclusions policymakers and markets can realistically draw.

 

Headline CPI for November is expected to rise to 3.1% year-on-year, up from 3.0% previously. A result in line with expectations would reinforce the narrative of inflation proving sticky rather than re-accelerating. Crucially, however, it is unlikely to meaningfully alter the Fed’s policy outlook. One data point — particularly an incomplete one — is unlikely to outweigh broader trends in labour market cooling.

 

Recent Fed communication supports this view. Fed Governor Chris Waller struck a broadly dovish tone earlier this week, highlighting emerging labour market softness and suggesting rates remain 50–100bp above neutral. That said, there was no urgency to cut, and markets continue to price only a modest chance of a January move, with March seen as the more realistic starting point for easing.

 

EUR/USD forecast: Europe may matter more for the dollar than US data

 

Today’s US data is unlikely to be a gamechanger for the dollar unless jobless claims deliver a major upside surprise. Instead, attention is increasingly shifting toward Europe and how policymakers there frame the outlook for 2026. Guidance from the ECB and BoE could have a much larger influence on FX pricing than today’s US releases. If the ECB is perceived as being less concerned about medium-term inflation risks than markets expect, that could provide the catalyst for renewed euro buying.

 

 

EUR/USD technical analysis and key levels

 

 

From a technical perspective, the EUR/USD forecast remains in a bullish trend. This is reflected in rising moving averages, a short-term bullish trend line, and price action that has continued to post higher highs and higher lows in recent weeks. Against this backdrop, it remains difficult to take a bearish view on EUR/USD exchange rate.

 

That said, price has eased back slightly from the 1.18 handle, which was my initial upside target and has now been reached. The pullback from this level comes as no surprise, as traders take profits around prior resistance. However, it is far too early to suggest that the euro has topped out.

 

I expect downside to remain limited, with key support now seen in the 1.1650 to 1.1685 area. This zone is important, as it combines the 21-day exponential moving average, the short-term bullish trend line, and prior resistance. A potential bounce from this area could lift EUR/USD back towards resistance at 1.1750. A decisive break above 1.1750 would open the door for a retest of the 1.18 handle in the near term.

 

Above 1.18, there is relatively little resistance until the September 2025 high around 1.1919, with the 1.20 handle representing the next and ultimate upside objective in the short term.

 

On the downside, the 1.1650 to 1.1680 region remains a critical support zone. Should this area break decisively over the coming days—perhaps following a dovish ECB decision or a broader recovery in the US dollar—the next downside target would be around 1.15, where the 200-day moving average converges with longer-term support.

 

Overall, momentum and the balance of risks remain skewed to the upside. For that reason, I continue to look for dips to be supported, while resistance levels are more likely to give way.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R