Outlook
The euro remains in a calm, range-bound tone as markets digest limited Eurozone data and a softer USD environment. A positive surprise in Germany’s February consumer confidence could lift the EUR, while the longer-term backdrop is supported by Bulgaria’s euro adoption and progress on the ECB’s digital euro project. Inflation and growth forecasts point to a stable, not overheating, euro area, keeping policy dynamics non-committal for now.
Key drivers
- Germany’s February consumer confidence index release today; a better reading could prompt near-term euro gains.
- Bulgaria’s adoption of the euro on 1 January 2026 adds euro-area credibility and could influence regional capital flows.
- The ECB advancing the digital euro project toward a potential 2029 issuance, with 2026 legislation shaping the timeline.
- Eurozone inflation expected to ease toward the target range (around 1.7% in 2026) and a neutral monetary policy stance anticipated in 2026, with policy rates likely in the 1.75%-2.25% range. Markets expect the ECB to remain on hold rather than hike aggressively.
- Eurozone growth projected near 1.6% in 2026, supported by fiscal measures and solid labor markets.
- The EUR is influenced by the USD; a softer dollar has not yet produced a clear, sustained lift for EUR.
- Oil prices rising to near 66.67 as a 90-day high; higher energy costs could feed inflation expectations and influence euro cross dynamics.
- Ongoing geopolitical and energy-security concerns, including the Ukraine situation, continue to shape risk sentiment and euro stability.
Range
EURUSD is at 1.1972, versus a 3-month average of 1.1669, with a 4.8% trading range from 1.1480 to 1.2031.
EURGBP is at 0.8665, just 0.9% below its 3-month average of 0.8742, in a 2.0% range from 0.8657 to 0.8833.
EURJPY is at 183.3, 0.7% above its 3-month average of 182, in a 5.5% range from 176.4 to 186.1.
Oil (USD) is around 66.67, near 90-day highs, 5.8% above its 3-month average of 63.04, with a range from 59.04 to 66.67.
What could change it
- A clearer upside surprise or downside surprise in Germany’s or broader Eurozone data, especially consumer confidence or inflation prints.
- Faster or slower progress on the digital euro could alter long-horizon EUR demand and policy expectations.
- Unexpected shifts in Eurozone inflation or growth data prompting a re-pricing of ECB policy expectations.
- Further developments from Bulgaria’s euro adoption and any related policy adjustments or cross-border capital flows.
- Significant moves in oil and energy markets that alter euro-area inflation expectations or energy resilience.
- Shifts in US monetary policy or global risk appetite that change USD strength and EUR/USD correlations.
