Interesting how the dollar-euro exchange rate has developed over the past few months. I've been observing this dynamic for a while, and there are some points that are really exciting.

On one hand: The interest rate differentials between the Fed and the ECB remain a major driver. The ECB has achieved its targets and is holding steady, while the US – as planned under Trump – has to expect further rate hikes. This actually favors a stronger euro, but reality is more complex.

Looking at the macro data, it gets interesting. Eurozone inflation fell to 2.1% at the end of 2025 and is thus very close to the target. In contrast, in the US, it still hovers around 3%. Theoretically, this should put pressure on the dollar-euro rate and strengthen the euro. But here comes a big "but": Growth paths are completely different.

The US is pursuing an aggressive fiscal policy with massive investment programs and tax cuts. Germany and the Eurozone have also launched spending programs, but growth remains weak. The EU Commission projected only 1.2% GDP growth for 2026 – significantly below US expectations. This is the key point in the dollar-euro rate forecast.

Another factor many underestimate: the balance of payments. The US has a substantial current account deficit (about $250 billion in Q2 2025, or 3.3% of GDP). The EU, on the other hand, shows a surplus of about €81 billion. In theory, this should strengthen the euro, but markets do not react so simply.

What fascinates me especially: trade policy. After the tariff threats in April 2025, the US and EU agreed on a trade deal with a 15% baseline tariff (higher for steel and aluminum). This reduces immediate uncertainty, but the dynamics remain fragile.

The market consensus was that the euro would continue to appreciate against the dollar. But honestly: the previous development shows that Fed policy weighs more heavily than many expected. The growth gap between the US and Eurozone is simply too large.

The biggest question mark for the dollar-euro forecast until the end of 2026 remains how the economic programs will actually work. From my perspective, Germany’s spending package is a real black box – the conditions in the German economy are so difficult that it’s unclear whether the program will have the desired effect.

Anyone trading the dollar-euro rate should keep an eye on these factors: interest rate expectations, inflation differentials, growth dynamics, and geopolitical developments. Especially now in 2026, it will become clear which forecast will prevail.