Outlook
The euro remains in a cautious, range-bound stance amid mixed signals. With eurozone data scarce today, moves will hinge on geopolitics and policy expectations. EURUSD sits around the 1.18 area, near 7-day lows but within a 3-month range defined by 1.1516 to 1.2031. Positive signals from the digital euro legislation and the ECB’s inflation-management approach could offer modest upside, while a renewed US dollar rally or higher energy costs could cap gains.
Key drivers
- Germany’s ZEW economic sentiment unexpectedly fell, adding to near-term growth concerns for the euro area.
- A risk-off mood has supported the euro versus higher-yielding peers, even as markets monitor Russia-Ukraine peace talks in Geneva.
- Digital euro legislation is advancing, with a June 2026 vote in the European Parliament slated to shape the currency’s future use.
- The ECB is viewed as maintaining an accommodative stance for now, with policy signals suggesting inflation dynamics will influence the trajectory toward late-2026 normalization.
- Efforts to broaden the euro’s role in the global monetary system are under way as USD dominance wanes, providing some longer-term upside potential.
- Oil remains elevated, around 70.26 USD per barrel (near 90-day highs), adding inflation risks for the euro area and shaping ECB policy considerations.
Range
EURUSD is trading near 1.1783, with the 7-day low around 1.1783 and a 3-month range of 1.1516 to 1.2031. EURGBP is near 0.8739, within a 30-day range of 0.8628 to 0.8819. EURJPY sits around 182.4, within a 3-month range of 180.1 to 186.2. Oil price is at 70.26, with a 90-day range of 59.04 to 70.26 and about a 9.7% above the 3-month average.
What could change it
- A clearer signal from the ECB on policy normalization or a shift in stance could push EUR higher toward 1.20+ if inflation expectations move faster than priced in.
- Outcomes from the digital euro vote and broader euro-area policy developments could add modest upside for the euro.
- US data surprises affecting the dollar—strong data could weigh on the euro, while softer US data could lift it.
- Russia-Ukraine geopolitical developments or breakthroughs ahead of Geneva talks could drive sentiment and EUR direction.
- Further oil price moves (up or down) will influence euro-area inflation expectations and ECB policy bets.
