3 Forex strategists discuss EUR/USD outlook for 2025 amid a massive regime shift

Investing.com -- Forex strategists from JPMorgan, Bank of America, and Macquarie see upside for the EUR/USD in 2025, citing a major shift in global economic and fiscal dynamics that favors the euro over the U.S. dollar.

JPMorgan: Turning Tactically Bullish on EUR/USD

After maintaining a bearish stance on the euro throughout 2024, JPMorgan has now turned tactically bullish on EUR/USD, citing a "regime shift" driven by improving sentiment in Europe and moderating U.S. exceptionalism. 

The bank expects EUR/USD to move towards 1.12-1.14, stating that “a further moderation in U.S. data could increase that estimate, while tariffs could push it lower.”

“What was less visible was when this inflection would occur,” JPMorgan analysts wrote. 

“We are now approaching that inflection point, prompting us to turn bearish on the dollar and constructive on the euro for the first time since 2024.” 

The firm had previously forecasted a drop to parity (0.99) in Q1 in the event of a "Red Sweep" in the U.S. elections but now sees upside risks to its 1.08 year-end target.

BofA: ’Euro Up’

BofA analysts see a technical breakout in EUR/USD, drawing comparisons to the 2016-2017 pattern that preceded a major dollar decline. 

“[The] DXY trend [is] firmly set to down and euro up,” they wrote, expecting a move to the 1.12s in the medium term, with potential longer-term upside to 1.20 if the 2017 rally repeats.

“The DXY went forth and confirmed its head and shoulders top,” the analysts noted, pointing to downside targets for the U.S. Dollar Index (DXY) at 105.10, 104, and 103.40, with a longer-term risk to 97. 

Meanwhile, the EUR/USD has broken higher, with BofA highlighting “the largest up week since November 2022”, signaling a strong bullish reversal.

Macquarie: Europe’s ‘Exceptionalism’ 

Macquarie sees a fundamental shift in Europe’s fiscal and geopolitical positioning, strengthening the euro.

 The firm argues that “Europe is becoming the U.S., finding its way to its own ‘exceptionalism’”, with fiscal expansions, defense commitments, and rising borrowing rates driving FX inflows rather than outflows.

“The EUR/USD is up 4% since Friday, supported by a sudden and significant increase in European sovereign yields that is coming without a commensurate rise in U.S. Treasury yields,” Macquarie analysts observed.

They expect continued euro appreciation if Europe’s fiscal assertiveness persists and the U.S. maintains its focus on deficit reduction.

With JPMorgan, BofA, and Macquarie aligning on bullish euro calls, the EUR/USD outlook for 2025 appears increasingly constructive.