Outlook
The euro is likely to stay range-bound in the near term as liquidity thins and data remains scarce. The ECB’s decision to hold policy at 2% amid inflation around 1.7% and a resilient eurozone economy supports a patient stance, with little impetus for near-term moves. Bulgaria’s adoption of the euro at the start of 2026 adds euro-area integration but has not shifted policy expectations. The euro remains sensitive to shifts in dollar strength and energy-price dynamics; a firmer USD or higher oil prices could tilt EUR/USD toward the lower end of its range, while a softer dollar or stabilizing inflation could lift the pair toward the top of the range. Overall, the cross-asset backdrop suggests only muted directional bias for now.
Key drivers
ECB held rates at 2% with inflation at 1.7%, underscoring policy patience amid a resilient economy.
Bulgaria joined the eurozone on January 1, 2026, reinforcing euro-area integration.
EUR strength against the USD weighs on European export competitiveness and reflects sensitivity to US policy expectations.
Oil around 69 USD adds energy-price risk to eurozone inflation and growth dynamics.
Range
EUR/USD is at 1.1887, about 1.5% above its 3-month average of 1.1709, having traded in a roughly 4.5% range from 1.1516 to 1.2031.
EUR/GBP is at 0.8724, near 30-day highs and close to its 3-month average, with a stable 2.4% range from 0.8628 to 0.8833.
EUR/JPY is at 183.7, just above its 3-month average, trading in a tight 3.8% range from 179.3 to 186.2.
Oil (Brent Crude OIL/USD) is at 69.05, near 7-day highs, about 8.6% above its 3-month average of 63.6, with a volatile range from 59.04 to 69.09.
What could change it
A stronger-than-expected euro-area inflation print or hawkish ECB commentary could push EUR higher toward the top of its range.
A softer U.S. dollar or shifts in Fed policy expectations could lift EUR/USD and broaden gains.
Significant moves in oil or energy prices could feed through to eurozone inflation expectations and growth, altering the euro’s trajectory.
Geopolitical or policy developments affecting the eurozone, including updates on Bulgaria’s integration timeline, could also shift sentiment.
