Credit Agricole warns of EUR/USD downside risk come next year

Credit Argicole notes that as things stand, “many EUR positives and USD negatives are already in the price” when viewing EUR/USD. Taking that into consideration, that limits room for further upside in the near-term for the pair. As such, the firm is maintaining a more neutral stance for the remainder of 2025.

On upside risks, they argue that further attacks by Trump on the Fed’s independence and US data softness after the shutdown could give EUR/USD a temporary boost. However, the bigger picture outlook of the “sell America” trade has not quite materialised. On that, Credit Agricole points to the fact that we are still seeing record foreign inflows into US assets and that is a supportive factor for the dollar.

The second point is something we already talked about in September here.

Going back to Credit Agricole’s note, they warn that French political risks could resurface again in the closing stages of 2025 – creating a fresh headwind for the euro. So, that will in turn cap any major gains for the pair ahead of the turn of the year. As for next year, they are holding a more bearish outlook with political risks in the euro area still persistent while any fiscal optimism looks set to fade over the medium-term. As such, they anticipate renewed EUR/USD selling throughout 2026.