May 2026
EUR is currently gaining against USD trading around 1.1630 mark. This
move stems from a combination of factors such as disappointing macroeconomic
data from the US, hawkish signals from the European Central Bank (ECB) and new
positive developments on the geopolitical front. ECB officials highlighted that
they may be forced to keep interest rate at restrictive levels for a longer
period. The divergence between a softer Fed and an inflation-wary ECB provided
a strong impetus for the strengthening of EURUSD.
April 2026
Eurozone economy depends a lot on imported energy. As a result, when the oil prices go up, inflation risk rises and economic growth slows down. This makes ECB have less room to adjust interest rates. If the supply shock continues, higher energy costs will make it harder for ECB to control inflation, which will make the EUR weaker versus USD. As a result, while the markets seem to continue to price in further tightening from European Central Bank, EURUSD can struggle to extend their gains.
March 2026
EUR weakness was driven by safe-haven dollar demand as oil price spiked above $100. When the energy prices threatened a 1970s supply shock, capital went into dollar as dollar liquidity is the deepest pool in the world during crises. Deeper crisis can hit both inflation and growth simultaneously causing stagflation. Both ECB and the Fed maintain cautious tone neither providing clear directional guidance on rates. As a result, EURUSD stays in a tight range instead of trending in either direction. Every credible signal towards conflict resolution will move the USD lower and EUR higher. Every credible signal of escalation would trigger an opposite movement.
February 2026
Euro is now viewed more as a safe haven. It is more of a dollar weakness contributing to the pair than the strength of the euro, as the growth in Europe is still too weak. A stronger EUR can help ease inflation but it hurts export competitiveness. Although exports can gradually improve, the risk of stagnation remains due to increasing competition from other countries like China.