Outlook
The euro remains dented by Russia-Ukraine concerns and a firmer US dollar, with eurozone data light today and market focus on ECB communications, including remarks from policymaker Piero Cipollone. The ECB kept rates at 2% on February 5, citing economic resilience, while January inflation cooled to 1.7%—raising questions about the timing of potential rate cuts. Bulgaria’s adoption of the euro adds a longer-term euro-positive backdrop, but near-term momentum for the currency remains constrained by geopolitical risk and energy-market volatility.
Key drivers
- Russia-Ukraine tensions and energy-price volatility affecting risk sentiment and euro stability
- ECB policy path expectations, with inflation softening and potential later-rate cuts underpinning a cautious euro bias
- Sparse eurozone data, making Cipollone’s commentary a potential but limited near-term catalyst
- Export competitiveness pressures as the euro strengthens versus the dollar
Range
EURUSD around 1.1870, 1.3% above its 3-month average of 1.1717, having traded in a 1.1516–1.2031 range over the last 3 months
EURGBP around 0.8695, just below its 3-month average, within a 0.8628–0.8833 range
EURJPY around 181.3, 0.9% below its 3-month average of 182.9, within a 179.6–186.2 range
Oil (Brent Crude OIL/USD) around 67.17, near 7-day lows, 5.3% above its 3-month average of 63.76, with a 59.04–70.26 range
What could change it
- Clearer ECB guidance on the policy path (hawkish tilt or confirmation that rate cuts are not imminent) influencing euro expectations
- Inflation trajectory shifting back toward or away from the 2% target in the euro area
- Escalation or de-escalation of Russia-Ukraine tensions and evolving energy prices
- Movements in US yields and dollar strength altering broad risk sentiment
- Euro-area data surprises (inflation, growth, PMIs) altering near-term euro prospects
