Bank of America Sees Short-Term Upside for Euro, Downside Risk for US Dollar

Bank of America sees near-term upside potential for the euro and corresponding downside pressure on the U.S. dollar, according to a recent analysis. The bank has largely maintained its forecasts for most major bilateral exchange rates.

Euro Strength Forecast

BofA reiterated its positive outlook for the euro against the U.S. dollar (EUR/USD), citing continued confidence in the single currency's trajectory. The bank's projections for the currency pair are:

• 1.12 by the end of the third quarter
• 1.15 by the end of the year
• 1.20 by the end of 2027

These forecasts suggest a sustained appreciation of the euro over the medium to long term.

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Revisions for Yen and Canadian Dollar

While the euro forecast remains unchanged, Bank of America adjusted its outlook for the U.S. dollar against the Japanese yen (USD/JPY) and the Canadian dollar (USD/CAD).

The bank lowered its USD/JPY forecast, pointing to shifting market dynamics in Japan and a rising risk of coordinated foreign exchange intervention. BofA noted it had previously addressed this risk in an August 5, 2026, report titled "FAQ on coordinated JPY-buying intervention."

Similarly, the forecast for USD/CAD was revised downward to approximately 1.40 for the remainder of this year and into 2027. This adjustment reflects market expectations that the Bank of Canada is more likely to keep interest rates on hold in the medium term compared to previous assumptions.