BofA Sees Near-Term Euro Weakness Ahead of Potential Dollar Strength

Bank of America's analysts are cautioning that despite the euro's recent recovery against the US dollar, there is still room for a near-term pullback. The EUR/USD exchange rate slipped to around 1.1504 on Monday after opening near 1.1548.

The bank believes that the July Fed press conference 'injected uncertainty' around the Fed's inflation-fighting commitment and reaction function, describing it as 'doveish and confused'.

BofA's economists continue to forecast three 25-basis-point increases over the remaining meetings of 2026, which they believe will increase the probability that the Fed will hike in September. They predict the EUR/USD exchange rate will be at 1.12 in September, and 1.15 at year-end.

The bank's forecast suggests a strong dollar ahead, but also notes that the Euro's technical recovery has improved after the late-July surge, with a sustained hold above 1.1500 potentially keeping 1.1555 and 1.1600 in view.