Outlook
The euro remains modestly muted as eurozone consumer confidence stays downbeat; a positive PMI print this month could offer a small uplift. In the medium term, the ECB’s accommodative stance, ongoing progress on the digital euro, and the euro’s potential to strengthen on a improving growth backdrop could help stabilize the currency, especially if energy costs stabilise and growth holds up.
Key drivers
- Eurozone consumer confidence is weak, with PMI data due this month; a firmer private sector could provide modest support for the euro.
- Digital euro legislation is advancing, with a June 2026 vote planned; progress could boost the euro’s payments landscape and global role.
- ECB inflation dynamics: a stronger euro is projected to help curb inflation (about 0.6 percentage points over three years from a 10% appreciation), supporting a cautious policy path.
- The ECB is expected to maintain an accommodative stance, with rate stability anticipated into late 2026; policy signals and euro-area growth resilience remain key.
- External factors: oil prices at multi‑week highs add energy-price risks to the euro area, influencing inflation and growth dynamics.
Range
EUR/USD is at 1.1789, just above its 3‑month average, having traded in a roughly 4.5% range from 1.1516 to 1.2031. EUR/GBP is at 0.8747, near 60‑day highs and just above its 3‑month average, with a 2.0% range from 0.8628 to 0.8799. EUR/JPY is at 182.7, near 7‑day highs and just below its 3‑month average, within a 3.4% range from 180.1 to 186.2. Oil/USD is at 71.61, 90‑day highs, about 11.5% above its 3‑month average of 64.24, within a 21.3% range from 59.04 to 71.61.
What could change it
- A stronger-than-expected eurozone PMI or consumer confidence reading could push the euro higher.
- Hawkish ECB messaging or a faster-than-expected path toward policy normalization (even with late-2026 rate stability) could lift the euro.
- A meaningful pullback in oil prices or energy costs reducing eurozone inflation pressures.
- Progress on the digital euro and clearer EU-wide monetary integration signals could support the euro’s longer-term role.
- Escalation in geopolitical risks or a sharper shift in global risk sentiment could weigh on the euro versus the dollar.
