The EUR/USD rate is expected to soften over the coming winter before lower energy prices help drive a recovery towards 1.23 by end-2027.
The Euro-Dollar exchange rate rose towards $1.1650 on Wednesday, extending its recovery from below $1.16 last week as broader US Dollar weakness and expectations of an ECB interest-rate increase supported the currency.
At the time of writing, EUR/USD was trading around 1.1647, up 0.17%.
Currency analysts at SEB expect that recovery to face a winter setback, forecasting 1.15 at the end of 2026 before a sustained rise through 2027.
The bank sees EUR/USD reaching 1.17 in March, 1.19 in June, 1.21 in September and 1.23 by December 2027.
Winter comes before the stronger Euro
SEB’s caution centres on the Middle East conflict and the prospect of continued disruption to energy supplies.
“EURUSD is likely to remain range-bound for the coming months, with Iran having little incentive to reach a deal before the US midterms.”
Higher winter gas prices would put renewed pressure on Europe, while concerns about French debt sustainability add another risk to the Euro.
Thursday’s ECB decision provides a nearer-term test, with policymakers due to announce their decision after meeting in Berlin.
The immediate outlook is firmer in our recent report on Scotiabank’s assessment of limited resistance before 1.1700, although that call covers a much shorter horizon.
Why SEB expects Dollar weakness in 2027
SEB argues that expectations of persistent US inflation are already substantially reflected in interest-rate pricing.
A fall in energy costs could therefore change the outlook for the Dollar.
“The broader USD direction is skewed towards weakness, but a sustained depreciation trend requires lower energy prices and a reopening of Hormuz, which looks like a theme for 2027.”
The bank also highlights investors’ substantial exposure to Dollar assets following a decline in currency hedging.
Increasing those hedges or bringing overseas investments home could generate additional Dollar selling.
We think the energy assumption is the key to this forecast: SEB’s 1.23 projection depends on conditions improving enough to allow a broader Dollar decline.
A prolonged disruption through winter would delay that improvement and leave the Euro more exposed to its energy bill.
Our currency coverage draws on live market data, official economic releases and published bank research.
