EUR/USD stays steady as the US Dollar gains strength, backed by light economic data from the US. Inflation in the Eurozone is decreasing, and business confidence in Germany has weakened for the second month in a row. Market focus is on the upcoming US Consumer Price Index (CPI), jobless claims, and the European Central Bank (ECB) meeting, which is not expected to change any policies. The currency pair hovers around its opening price of 1.1750, with the US Dollar recovering some value. The Euro is under pressure from falling inflation in the Eurozone and decreased business sentiment in Germany. Economists predict that the ECB will keep interest rates unchanged during its meeting next week.

Mixed Signals And Impacts

US Federal Reserve officials have sent mixed signals, with some highlighting solid GDP growth and expectations of continued economic growth through 2026. Inflation data, jobless numbers, and the ECB’s meeting will likely shape market trends going forward. This week, the Euro showed varied performance against other currencies, making its biggest gains against the Australian Dollar. However, potential geopolitical tensions, like the situation between Russia and Ukraine, could influence the Euro’s strength, depending on developments affecting economic policies. The EUR/USD is currently trading around 1.1750, balancing conflicting economic signals. The Euro is weakened by lower inflation and poor German business confidence, while dovish comments from the US Federal Reserve are fostering uncertainty in the market. All eyes are now on the upcoming US Consumer Price Index data. After a November 2025 report showed core inflation stubbornly over 3.5%, another high reading could complicate the Federal Reserve’s plans for easing next year. In contrast, inflation in the Eurozone fell to 2.4% year-over-year last month, giving the ECB little reason to change its current stance.

Market Dynamics Ahead

This consolidation in the market has pushed implied volatility on one-month EUR/USD options to its lowest since the third quarter of 2025. This makes option strategies like straddles cheaper ahead of key data releases. A significant surprise from either the US CPI report or the next week’s ECB meeting could lead to a sharp price move. For now, key levels to watch are the support at 1.1700 and the resistance at 1.1800. We expect movements to stay within this range until new catalysts appear. Traders should also keep an eye out for any unexpected news regarding the Russia-Ukraine conflict, as progress in negotiations could boost the Euro unexpectedly. This situation resembles the market dynamics we observed in 2024 when traders were also awaiting a clear divergence in central bank policies. Historically, long periods of low volatility have often led to strong directional moves. The upcoming data and central bank meetings will likely determine whether we test the 100-day moving average near 1.1650 or push towards the yearly high of 1.1918. Create your live VT Markets account and start trading now.

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