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Euro Drops 1% Weekly as Fed Hike Boosts Dollar

By Markets Desk · 2026-09-20 · 1 min read
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Illustration: Tradingbird

The Euro fell nearly 1% against the US Dollar last week, closing near 1.1486. Analysts at ING and Crédit Agricole expect further declines despite potential ECB tightening.

The EUR/USD pair closed the week at 1.1486. This represents a decline of almost 1% from the previous week's close. The drop was driven largely by the Federal Reserve's recent policy move.

ING warns the currency pair may test the 1.1400 level. Crédit Agricole projects a lower target of 1.13 by December. Both banks acknowledge that European Central Bank actions could limit the downside.

Fed decision drives weekly decline

The Federal Reserve raised interest rates by 25 basis points to 3.75%-4.00%. This move pushed the EUR/USD rate below 1.15 on Wednesday. The Fed's median projection for end-2026 is 4.1%, implying another rate hike.

Higher short-term US yields support the Dollar. ING notes that energy prices and incoming data may encourage markets to price in an October hike. This dynamic continues to weigh on the Euro.

ECB tightening limits downside risk

Hawkish commentary from the ECB provides a floor for the Euro. ING advises against chasing lower prices too aggressively from current levels. The bank sees 1.1400 as a near-term downside risk but allows for stabilization.

Crédit Agricole maintains a moderately bearish stance. The bank expects additional ECB tightening to limit downside risks in coming months. Factors like expensive energy and sovereign credit concerns still weigh on European assets.

Long-term outlook shows gradual recovery

Crédit Agricole forecasts the Euro at 1.14 in June 2027. The rate is projected to reach 1.16 in September and 1.17 in December 2027. This follows a low of 1.13 in December 2026 and March 2027.

Cheaper oil has slowed the Dollar's recent advance. ING doubts that diplomatic talks will push Brent crude below $100 per barrel immediately. The immediate test is whether lower energy costs can loosen the Dollar's grip before longer-term forecasts materialize. Exchange Rates UK reported these market dynamics.

Based on reporting by Exchange Rates UK, compiled by the Tradingbird desk.

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