EUR/USD Upside Looks Tired Into Year-End as Dollar Support Persists, Crédit Agricole Says
Traders betting on a stronger euro may be running into diminishing returns: Crédit Agricole argues that most euro-positive and dollar-negative narratives are already priced, capping EUR/USD upside into the close of 2025.
Pricing looks saturated, keeping the bank neutral near term
Crédit Agricole maintains a neutral stance on EUR/USD for the remainder of 2025, contending that the market has largely absorbed supportive euro drivers and headwinds for the dollar. With positioning stretched around consensus themes—ECB-Fed convergence, disinflation progress in Europe, and a softer U.S. growth pulse—the bank sees limited room for a breakout higher absent a fresh catalyst.
What could still lift EUR/USD short term
The bank flags two potential upside sparks: renewed attacks by Donald Trump on the Federal Reserve’s independence and a patch of weaker U.S. data following the recent government shutdown. Either could sink Treasury yields and weaken the dollar, providing a temporary pop for EUR/USD. Still, the bank stresses these would likely be tactical tailwinds rather than a durable trend shift.
“Sell America” hasn’t arrived—foreign inflows keep the dollar underpinned
Despite widespread chatter around a “sell America” rotation, Crédit Agricole notes that record foreign inflows into U.S. assets continue to bolster the greenback. Robust demand for U.S. equities, Treasuries, and cash-like instruments keeps the dollar’s carry and liquidity appeal intact. In a world of uneven global growth and still-wide rate differentials, that structural bid blunts the euro’s upside—even when U.S. data underperforms at the margin.
Euro risk premium lingers: French politics back in focus
The bank cautions that French political risks could resurface late in 2025, reviving fragmentation fears and widening peripheral spreads—classic headwinds for the euro. Into 2026, Crédit Agricole holds a more bearish EUR/USD view, citing persistent political uncertainty across the euro area and a fading fiscal impulse that may curb growth and limit the ECB’s room for maneuver. Those dynamics, they argue, set the stage for renewed euro selling next year.
Market snapshot
- Crédit Agricole stays neutral on EUR/USD into the end of 2025, seeing limited upside as positives are already priced.
- Short-term EUR strength could stem from political pressure on the Fed and softer U.S. data post-shutdown—but likely fleeting.
- Record foreign inflows into U.S. assets and yield support continue to underpin the dollar.
- French political risk may re-emerge late 2025, capping euro gains and elevating risk premia.
- Base case for 2026: a bearish tilt for EUR/USD as euro-area political noise persists and fiscal optimism fades.
Strategy implications
– Near term, the tone favors range trading as implied FX volatility stays contained and liquidity thins into year-end.
– For discretionary desks, rallies on softer U.S. data may be viewed as tactical rather than trend-defining given ongoing dollar support from flows and carry.
– Monitor event risk: U.S. fiscal headlines, Fed communication around policy independence, French budget politics, and demand at Treasury auctions.
BPayNews view
Crédit Agricole’s call captures current cross-currents: a euro supported by improving domestic narratives but outgunned by the dollar’s structural tailwinds. Without a sustained narrowing in U.S.-eurozone rate and growth differentials—and with European political risk never far from the surface—EUR/USD looks more likely to churn than trend higher into year-end.
Questions & Answers
What is Crédit Agricole’s base case for EUR/USD into year-end 2025?
The bank is neutral, arguing most euro positives and dollar negatives are in the price, which caps further upside in the near term.
What could drive a short-lived EUR/USD bounce?
Fresh political pressure on the Fed’s independence and weaker U.S. data following the shutdown could temporarily weigh on the dollar and lift EUR/USD.
Why hasn’t the “sell America” trade materialized?
Crédit Agricole points to record foreign inflows into U.S. assets, sustaining dollar demand via yield, liquidity, and safe-haven appeal.
What risks could cap euro gains late in 2025?
French political risk—potentially reviving concerns about fiscal sustainability and spread widening—could reintroduce a euro risk premium.
What is the outlook for 2026?
The bank expects renewed EUR/USD selling, citing persistent euro-area political risks and diminishing fiscal optimism that could weigh on growth and sentiment.
