**BREAKING: BNP Paribas Projects US Dollar Weakness Against Euro on Fed Pause Outlook**
BNP Paribas is forecasting a gradual depreciation path for the US Dollar versus the Euro as the Federal Reserve moves toward a prolonged pause in monetary policy adjustments. The French banking giant expects the US economy to expand above potential at 2.4% GDP growth in 2026, while inflation remains elevated at 3.8%, overshooting the Fed’s 2% target. Despite the inflationary pressure, BNP Paribas anticipates the FOMC will maintain the Fed Funds target range steady at 3.5%-3.75% throughout the year as policymakers adopt a two-sided risk outlook balancing growth and price stability concerns.
This forecast suggests the Dollar will face sustained headwinds against the Euro as interest rate differentials narrow and market participants price in an extended Fed hold pattern. Currency traders should prepare for potential USD weakness particularly if European Central Bank policy diverges with tighter conditions or if US inflation proves stickier than anticipated.
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FXnCO Insight
** Position for gradual EUR/USD strength through 2026 as Fed pause expectations solidify, but monitor inflation data closely for any hawkish policy pivots.
Source: FXStreet