BNP Paribas sees gradual US dollar depreciation versus euro as Fed holds rates
BNP Paribas expects the US dollar to follow a gradual depreciation path versus the euro as the Federal Reserve is seen keeping the funds rate in a 3.5%-3.75% target range. The bank projects US GDP growth above potential in 2026 (GDP forecast 2.4%) alongside hotter inflation (they forecast ~3.8%), and says the FOMC will adopt a two-sided outlook that supports a steady policy rate.
Why BNP Paribas' outlook matters for Forex traders
BNP Paribas combines a relatively strong growth forecast with elevated inflation and a view that the Fed will hold policy rates. For currency markets, that mix is important because it separates nominal policy rates from real yield dynamics. If inflation expectations remain elevated while the Fed signals a neutral, two-sided stance, real Treasury yields may be less responsive to policy rate levels. Markets may focus on how that affects the US dollar's interest-rate premium versus the euro and other currencies, making DXY and major dollar crosses sensitive to evolving yield and inflation signals rather than to headline rate moves alone.
Implications for EUR/USD, GBP/USD and USD/JPY
BNP Paribas' explicit expectation of a gradual dollar depreciation versus the euro highlights EUR/USD as a primary pair to watch. The pair may remain sensitive to shifts in US real yields, euro-area data and any re-assessment of monetary divergence. GBP/USD may be influenced by the same relative-yield considerations and UK-specific growth or inflation surprises, while USD/JPY may react to broader changes in US yield dynamics and risk sentiment. Traders and analysts may also monitor DXY readings and cross-currency flows that reflect evolving carry and valuation differentials.
The bank's view will be set against upcoming US economic data and Federal Reserve communications that markets will watch for confirmation. In particular, Treasury yield moves, inflation indicators and any change in Fed forward guidance are likely to be monitored closely for signs that validate or challenge BNP Paribas' projection of steady rates and a slowly weakening dollar versus the euro.