Citi Predicts Euro Gains Ahead of Federal Reserve Decision

Citi strategists predict the EUR/USD currency pair could retest summer highs near 1.17 if the upcoming Federal Reserve interest rate decision triggers a sell the news reaction in the U.S. dollar. Analysts identify a dovish hike as the most likely outcome, which would tactically weaken the dollar in the short term.

However, the scale of any dollar decline may be limited by attractive U.S. real interest rates and persistent energy and geopolitical risk premiums. While the euro has found technical support around 1.1575, strategists note that a hawkish European Central Bank may struggle to generate sustained gains if geopolitical concerns remain elevated.

Over a longer six-to-12-month horizon, the outlook for the U.S. dollar remains more constructive than these short-term projections.