Danske Bank Sees Euro Climbing to $1.22 in 12 Months Amid U.S. Rate Cut Expectations
The euro is poised for a significant rally, with analysts at Danske Bank forecasting the common currency to reach $1.22 within the next year, up from its current level of $1.1340.
The Danish lender’s bullish outlook hinges on anticipated monetary policy shifts in the United States, where the Federal Reserve is expected to implement 125 basis points of rate cuts by mid-2026. According to the bank’s latest note, the cuts could begin as early as next month, driven by mounting economic pressure stemming from President Trump’s trade policies, particularly the proposed tariffs on Chinese imports.
Danske Bank believes the Federal Reserve will gain clarity on tariff developments by this summer, which could influence the pace and scale of monetary easing. However, the Fed is widely expected to hold interest rates steady in its policy meeting this week, with no firm commitment to future cuts at this stage.
“By June and July, we expect the Fed to have a clearer picture of the final scope of China tariffs, as well as the broader implications of reciprocal measures,” the bank’s report stated.
Currency markets responded cautiously to the forecast, with the euro gaining 0.30% in early trading.
The outlook underscores growing divergence in monetary policy between the U.S. and the eurozone, potentially setting the stage for a weaker dollar and a stronger euro over the medium term.
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