I am currently observing the EUR/USD moves of the past few months and have to say: the euro’s rally has been impressive, but now it’s getting complicated. From 1.04 to over 1.19—that was a historic revaluation. But where is it really headed in 2026 and 2027?

What’s interesting about the current dollar exchange-rate development is that the interest-rate gap between the Fed and the EZB remains the euro’s strongest argument. The Fed keeps cutting toward 3.4%, while the EZB holds steady at 2.0%. Historically, such a narrowing by 100 basis points leads to a currency adjustment of 5–8%. That would theoretically push EUR/USD up to 1.22–1.25. Sounds bullish, but here comes the big caveat.

So far, Trump has surprisingly delivered good economic results. Q2 2025 GDP growth was 3.8%, driven by the AI boom. The tax reform keeps corporate taxes at 21%, TSMC is building three factories in Arizona, Samsung is investing 44 billion in Texas. This is real and provides structural support for the dollar. At the same time, Trump used tariff pressure to secure massive investment commitments—played it skillfully.

But Germany? That’s the Achilles’ heel of the euro forecast. The 500-billion stimulus sounds great, but reality is harsher. For households, German electricity prices are 30–35 cents per kilowatt-hour—two to three times higher than in the USA. For energy-intensive industries like chemicals or semiconductors, Germany remains structurally unattractive. On top of that: German infrastructure projects take an average of 17 years from planning to completion. The construction sector reports 250,000 open positions. This is an implementation problem that you can’t simply brush aside.

And now the political factor. The state elections 2026 are coming, and the AfD is polling at just under 25%. If the GroKo becomes dysfunctional, the stimulus package could get stuck. German government bonds could come under pressure, and risk premia could rise. That would be a major problem for the EUR/USD forecast.

France is also far from stable. The deficit is around 6% of GDP, and the debt ratio is 113%. In October 2025, a government collapsed within 24 hours. In Q3 2025, the eurozone grew by only 0.2% quarter-on-quarter—that’s weak compared with the USA. For 2026, only 1.5% growth is expected.

So where does that leave us? Bank forecasts for end-2026 range from 1.18 (Wells Fargo) to 1.25 (Morgan Stanley, BNP Paribas, Goldman Sachs). For 2027 it gets even wider—from 1.12 (Wells Fargo) to 1.30 (Deutsche Bank). That shows how much uncertainty there is.

My base case: EUR/USD moves in a range between 1.10 and 1.20. The interest-rate divergence creates a floor, while European risks limit upside potential. The exchange rate will likely trade between 1.14 and 1.17. Investors buy at 1.10–1.12 and sell at 1.18–1.20.

But the downside scenario is real: if the elections in Germany lead to stronger AfD support and the GroKo becomes dysfunctional, EUR/USD could fall to 1.08–1.10. Then the EZB would have to cut, while the USA continues with the AI boom. That would be a bear case down to 1.05.

The upside scenario: Germany stabilizes, the stimulus takes effect, and France calms down. The EZB signals rate hikes for 2027, while the USA slides into stagflation. Then EUR/USD could run up to 1.22–1.28.

What worries me most: the Germany risk is being underestimated. This political crisis is not a hypothetical scenario—the probability is very high. Add geopolitical shocks such as a Ukraine escalation, which would immediately push the dollar. And US resilience is also being underestimated. The AI boom could bring 2–3% annual productivity gains. That is structurally bullish for the dollar.

Conclusion: The EUR/USD forecast for 2026–2027 is volatile and event-driven. Key factors are the Landtagswahlen 2026 in Germany, the appointment of Powells Nachfolger in May, France’s fiscal situation, and US economic data. Put a lot of emphasis on risk management—the situation is too dynamic to commit to a fixed view. Flexibility is the order of the day.