Under German fiscal support, the euro against the US dollar is expected to strengthen

Market analysis firm ING recently released a research report predicting a significant turning point for European currencies next year. ING's chief forex analyst Chris Turner pointed out that the continued easing cycle of the Federal Reserve will directly weaken the safe-haven appeal of the US dollar.

Based on the current policy trajectory, ING forecasts that the Federal Reserve will cut interest rates by a total of 75 bps next year. In contrast, the European Central Bank's policy stance shows divergence, coupled with increased government fiscal support under Germany's monetary policy framework. This policy asymmetry is expected to support the performance of German assets.

Analysts note that an increase in the magnitude of rate cuts generally means lower costs for hedge arbitrage trades, thereby weakening the attractiveness of the US dollar as a reserve currency. Against this backdrop, the euro, as the main vehicle of German monetary policy, is expected to gain a relative advantage.

According to ING's predictive model, by Q4 2026, the EUR/USD exchange rate could rise to 1.22. This appreciation path is mainly driven by three factors: first, the continued easing by the Federal Reserve causing dollar depreciation pressure; second, Germany's fiscal stimulus policies improving the economic fundamentals of the Eurozone; third, the European Central Bank's relatively cautious policy stance providing support.

Industry insiders believe that future exchange rate trends will depend more on the relative changes in the policy paths of major central banks rather than the performance of a single economy.