Bank of America forecasts the euro will strengthen to 1.20/1.25 next year
- says the U.S. dollar risks slipping from slight overvaluation into undervaluation.
Analysts noted the dollar has been overvalued for much of the past decade, though 2025 so far has brought it closer to fair value thanks to
- German fiscal stimulus,
- ongoing trade tensions,
- and questions over U.S. institutional stability.
BofA warned that further erosion of institutional strength could push the dollar below fair value, creating scope for a more pronounced rally in the euro.