Outlook
In a data-light window, the euro remains vulnerable to moves in the US dollar and global risk sentiment. Lagarde’s comments on tariffs and inflation place little near-term pressure on the ECB’s policy path, and the minutes due today are unlikely to spark a clear turning point unless they reveal unexpected signals. Longer-term support could come from milestones such as Bulgaria joining the euro area and progress on the ECB’s digital euro, but near-term direction will hinge on external drivers. EURUSD sits near 1.1826 as a 90-day high, within a 1.1480–1.1826 range; EURGBP around 0.8664 within 0.8658–0.8833; EURJPY about 184.1 within 176.4–186.1. Oil at about 66.20 USD per barrel is also influencing risk appetite and inflation expectations.
Key drivers
- Data and central-bank guidance: a quiet data flow keeps the euro at the mercy of USD moves; ECB minutes and any fresh guidance could shift near-term bias. Markets see a neutral stance for 2026, with policy rates expected in the 1.75%–2.25% range.
- USD relationship: the euro’s performance is closely tied to USD strength or weakness in the current environment.
- Structural euro positives: Bulgaria’s adoption of the euro (Jan 2026) and the ECB’s digital euro project point to a longer-term euro-supportive trajectory.
- Inflation and growth outlook: euro-area inflation projected to ease toward 1.7% in 2026 with growth around 1.6% in 2026, supporting a stable policy backdrop.
- Energy and risk sentiment: elevated oil prices and broader geopolitical risk continue to feed volatility and influence the euro via inflation expectations and risk appetite.
Range
EURUSD: 1.1480 – 1.1826; EURGBP: 0.8658 – 0.8833; EURJPY: 176.4 – 186.1; Oil (USD): 59.04 – 66.20.
What could change it
- Unexpected euro-area data surprises (inflation, growth, or employment) or a clearer policy signal from the ECB.
- Shifts in US data or policy expectations that alter USD direction.
- Major geopolitical or energy-price moves affecting risk sentiment and inflation expectations.
- Progress or surprises around the digital euro timeline or Bulgaria’s euro-adoption milestones altering long-term euro dynamics.
