EUR/USD in 2026-2027: Can the Euro continue its impressive rally?

The EUR/USD showed an appreciation in 2025 that surprised many analysts. From the January low at 1.02 to the September peak at 1.19 – a move of over 1,600 pips. In November, the pair trades at 1.16. But is this just the beginning of a new era for the euro, or are the first signs of fatigue already showing? This EUR/USD forecast analyzes the most likely scenarios for 2026 and 2027.

The Core Dilemma: Why the EUR/USD Forecast Is So Difficult

The current situation appears clear at first glance: The European Central Bank is pausing its rate cuts (Deposit rate: 2.00%), while the US Federal Reserve continues to loosen policy. But behind this lie deep contradictions.

On one side is the structural interest rate logic. If the Fed lowers its key rate to 3.4% in 2026 and the ECB remains unchanged at 2.00%, capital should theoretically flow more into euros. Historical patterns suggest that a 100 basis point narrowing of interest rate spreads leads to a EUR/USD appreciation of 5-8% – thus to 1.22-1.25.

On the other side are the political and structural realities that challenge this thesis.

America under Trump: Why the US Economy Is More Resilient Than Expected

Trump’s second term has shown that his economic policy playbook works – at least in the short term. US GDP grew by 3.8% in Q2 2025, driven by the AI investment boom.

The tax reform from the “One Big Beautiful Bill Act” (July 4) made the 2017 tax cuts permanent. Companies continue to pay 21% taxes – a rate that attracts massive capital inflows due to low energy costs:

• TSMC is building three chip factories in Arizona ($165 billion)
• Samsung invests $44 billion in Texas
• Intel expands in Ohio ($20 billion)

Trade policy also works differently than many expected. The “Liberation Day” on April 2, with announced tariffs of up to 145%, caused market shocks – but was followed by a 90-day moratorium. The average tariffs are now around 15-18%, and more importantly: the US has received investment commitments worth billions to reduce tariffs. Trump has persuaded his partners to actively invest in America.

The price for this is: The US deficit will reach about 6% of GDP in 2026. The debt burden is rising. Trump’s public criticism of Fed independence undermines international investor confidence. This is probably why the dollar has lost over 10% against the euro since the beginning of 2025.

Europe Under Scrutiny: The 500 Billion Stimulus Might Miss Its Goals

Germany announced a €500 billion infrastructure package to be spread over 12 years. Markets cheered – but reality is more complicated.

The energy cost problem: German electricity prices are 30-35 cents/kWh for households and 15-20 cents/kWh for industry – two to three times higher than in the US. For energy-intensive sectors (Chemicals, Steel, Semiconductors), Germany remains structurally unattractive, even with the approved industrial electricity price of 5 cents/kWh for 2026-2028. Infrastructure investments do not lower these costs. The danger: factories that have already moved away will not return. The stimulus only fights symptoms.

The implementation trap: German infrastructure projects take on average 17 years from planning to completion – with 13 years for permits. The construction industry reports 250,000 open positions. The result: the economic multipliers of the stimulus could be significantly smaller than hoped.

Military spending stimulates the dollar: Parts of the “special fund” flow into US defense (F-35, Patriot, Chinook). This stimulates the US, not Germany.

The biggest risk – politics: The state elections in 2026 could make the AfD the strongest party in some federal states (current polls: nearly 25% nationwide). A government crisis and political paralysis would follow. German bund spreads would widen, and the implementation of the stimulus would stall.

France and the Eurozone: Underestimated Risks

France’s political instability is real. In October 2025, a government collapsed within 24 hours. The deficit is around 6% of GDP, and the debt ratio is 113%. French government bonds now yield higher than Spanish – a warning sign.

The Eurozone overall grew only 0.2% in Q3 2025 compared to the previous quarter (annualized: 1.3%). This lags far behind the US (3.8% in Q2 2025). For 2026, only 1.5% is expected.

The bright spot: Inflation is under control at 2.0%, and the unemployment rate is 6.3%. This gives the ECB room. But here too, a dilemma looms: if the German stimulus fully takes effect, inflation could rise – forcing the ECB to hike. But this is politically impossible for highly indebted countries. A real goal conflict scenario.

Technical Scenarios: Where Is EUR/USD Heading?

Supports: 1.1550 and 1.1470 are the key levels. Falling below 1.15 would threaten the bullish narrative and could trigger moves toward 1.10-1.12.

Resistances: The zone 1.1800-1.1920 is the critical hurdle. A sustained breakthrough above 1.20 would open the way to 1.22-1.25.

What Do Banks Say?

By the end of 2026, consensus is relatively clear – all major institutions expect further euro appreciation:

By the end of 2027, Wells Fargo is notably against the EUR/USD uptrend, expecting 1.12. Most other firms remain bullish:

Three Possible Scenarios for 2026-2027

Base Scenario (Probability: 50%): EUR/USD fluctuates between 1.10 and 1.20. The bullish interest rate logic provides a lower bound, while European risks limit upside potential. Germany develops mixed – the stimulus works partly, but also fizzles out. The US avoids recession but grows only moderately (1.8-2.2%). The pair mostly moves between 1.14 and 1.17.

Bear Scenario (Probability: 25%): EUR/USD falls to 1.05-1.10. State elections in 2026 bring the AfD forward, the grand coalition becomes dysfunctional, and the stimulus halts. German bund spreads widen, France escalates. The ECB must cut rates. Meanwhile, the US surprises positively: AI boom boosts productivity, inflation drops to 2%, Fed pauses at 3.50%. Worst case: EUR/USD tests 1.05.

Bull Scenario (Probability: 25%): EUR/USD climbs to 1.22-1.28. Germany stabilizes, the stimulus works quickly, and France eases. The Eurozone GDP reaches 2%, transforming the region. The ECB signals rate hikes for 2027 at the end of 2026. Simultaneously, the US crisis deepens: persistent inflation, weak labor market, stagflation. Foreign investors reduce US positions. EUR/USD breaks above 1.20 and moves toward 1.22-1.28.

To Act or Wait? The Strategy for 2026-2027

The uncertain EUR/USD forecast requires a flexible, event-driven approach. Key dates:

• State elections in Germany
• Appointment of the Fed Chair successor (Powell: May 2026)
• French budget developments
• German stimulus data
• US economic data

Risk management is central. The situation is dynamic – flexibility and quick adaptation are necessary.

Ignoring the Biggest Risks at Your Own Peril

Germany risk is greatly underestimated: A political crisis is not a theoretical scenario – the probability is high.

Geopolitical shocks: An escalation in Ukraine or a new energy crisis would drive massive dollar inflows. Europe’s energy diversification is advanced but not immune.

US resilience surprisingly strong: The AI boom could bring 2-3% annual productivity gains. Low taxes, cheap energy, and technological dominance make the US indispensable for companies.

Conclusion: EUR/USD Remains Between Hope and Risk

The EUR/USD pair in 2026-2027 stands at a crossroads. Interest rate logic favors the euro (Lower bound 1.10-1.12). The dollar is overvalued by 23%. Capital flows could reverse.

But Germany’s political fragmentation (Election crisis 2026?), high European energy costs, and US economic strength (AI, taxes) act as counterweights.

Key will be: Can Germany achieve political stabilization after the elections? Will the stimulus work despite structural hurdles? Will the US economy remain resilient?

The answers will determine whether we see a new euro strength – or if the dollar reclaims its dominance. For traders, this means: prepare scenarios, stay flexible, and do not underestimate the risks currently most ignored.