Outlook
The euro has been undermined by weaker German data, but is holding around the 1.18 area against the dollar with mixed recent moves. German consumer confidence fell to -24.7 (from -24.2), undershooting expectations for an improvement to -23.1, keeping near-term euro upside at risk. Markets are watching today’s Eurozone Economic Sentiment Index for a potential upside surprise that could support the euro. The ECB (European Central Bank) kept its deposit rate at 2.00% in early February, maintaining a neutral, data‑dependent stance that leaves the currency sensitive to new inflation signals. Structural drivers remain supportive longer term: Bulgaria’s adoption of the euro in January 2026 and ongoing progress toward a digital euro could gradually widen euro-area demand. Oil at about 70.92 USD per barrel is elevated, adding to import costs and potential inflation pressures, which in turn influence ECB policy expectations. The euro’s trajectory will also hinge on USD moves and broader risk sentiment, with EUR/USD hovering near 1.18 even as local data adds a degree of caution.
Key drivers
- German GfK consumer confidence weakened to -24.7 (vs -24.2 prior; forecast -23.1), adding near-term downside risk for the euro.
- ECB (European Central Bank) held rates at 2.00% on Feb 5, signaling a neutral, data‑dependent stance; policy clarity supports euro stability but leaves it responsive to incoming data.
- Bulgaria joined the euro area on January 1, 2026, expanding euro usage and potentially offering medium‑term euro support.
- The digital euro project advances, with potential long‑run benefits to euro adoption and settlement efficiency.
- European Commission forecasts point to moderating inflation (around 1.7% in 2026), suggesting gradual policy normalization rather than aggressive tightening.
- Oil prices around 70.92 USD per barrel, roughly 9.6% above the 3‑month average, imply higher energy costs that can feed into euro‑area inflation and policy expectations.
- Current price action signals: EUR/USD near 1.1814 (7‑day high, about 0.6% above 3‑month average 1.1748); EUR/GBP near 0.8711 (7‑day low); EUR/JPY around 184.5 (0.7% above 3‑month average 183.3). Range context shows active but contained movement in the major pairs.
- Oil-driven dynamics remain a potential source of volatility, given the broad impact on inflation and global risk appetite.
Range
EUR/USD around 1.1814, with a 7-day high near that level; 3‑month average ~1.1748; the day’s range roughly 1.1586 to 1.2031.
EUR/GBP around 0.8711, with a 7-day low near that level; the day’s range roughly 0.8628 to 0.8799.
EUR/JPY around 184.5; 3‑month average ~183.3; the day’s range roughly 180.5 to 186.2.
Oil (Brent Crude OIL/USD) around 70.92, 3‑month average ~64.69; the day’s range roughly 59.04 to 71.76.
What could change it
- A stronger-than-expected Eurozone Economic Sentiment Index today could push the euro higher.
- A hawkish turn in ECB commentary or stronger inflation data could lift the euro; a dovish shift or weaker data would weigh on it.
- Elevated energy prices or renewed energy tensions could keep euro-area inflation pressures high and support a cautious EUR move.
- A shift in USD strength driven by US data or policy expectations could move EUR/USD in either direction.
- Positive headlines on European growth or geopolitical risk easing could provide incremental euro support.
