The currency tug-of-war between the dollar and euro continues to dominate trading floors, and right now the greenback is winning.
EUR/USD hovers around 1.16–1.17 as of late November 2025, and the dollar isn't showing signs of backing down. Why? The Federal Reserve keeps delaying rate cuts while the European Central Bank sits on its hands. That divergence matters.
Fed inaction versus ECB paralysis—that policy gap is keeping the dollar firmly in control and the euro pinned down.
US inflation remains stubborn, labor markets stay robust, and yields attract capital like moths to a flame.
Meanwhile, the eurozone has inflation near target but lacks the economic oomph to push the euro higher. Political instability and trade tensions don't help either. When uncertainty spikes, money flows to the dollar. Always has.
The euro did have its moment this year. It appreciated nearly 10% over twelve months, with EUR/USD averaging 1.1184 in 2025 and hitting a high of 1.1837 in September. That rally? Already fading.
Technical charts show bearish signals dominating, with the euro breaking below key moving averages. Strong resistance sits near 1.12, and some analysts warn parity isn't off the table if momentum accelerates downward.
Yet here's the twist. ING's fair value models suggest the dollar is still 4% undervalued versus the euro. That implies the greenback has room to climb further, not weaken.
Other models hint the euro might be undervalued against fundamentals, but the market hasn't bought that story yet. Short-term forecasts see slight upside bias toward 1.18–1.20 by year-end if Fed cuts materialize and eurozone growth improves. Big ifs.
The downside scenario? EUR/USD could drop below 1.14 if US yields surge or eurozone data disappoints.
Technical chartists point to support levels at 1.0600 and 1.1000 as potential reversal zones, but those feel distant right now.
Medium-term consensus from major banks leans toward EUR/USD approaching 1.19–1.22 by late 2025 or early 2026. That suggests undervaluation may ease eventually.
But “eventually” doesn't pay the bills today. The dollar remains firm, volatility stays elevated, and safe-haven flows keep the greenback anchored. Until the Fed pivots or Europe surprises, the euro stays capped. Traders watching central bank interest rate decisions know these policy shifts create the most significant forex market movements, often triggering rapid revaluations in currency pairs. Beyond central banks, institutional investors and commercial banks drive the bulk of daily forex volume, positioning themselves ahead of major policy announcements and macroeconomic releases. Central banks like SARB in South Africa actively shape their currency markets through monetary policy decisions and occasional interventions, demonstrating how institutional actions influence exchange rate dynamics globally.
