As the dollar strengthens, EUR/USD falls below 1.170, says ING analyst Francesco Pesole

    by VT Markets
    /
    Jan 22, 2026

    Recalling the Dollar’s Strength

    Back in 2025, the dollar was strong, pushing the EUR/USD below 1.170. This strength came mainly from reduced tariff risks after the Greenland framework deal. At that time, we saw the potential for the pair to reach 1.1600 as the dollar gained momentum. Now in January 2026, the situation is changing. Recent data shows Eurozone inflation has unexpectedly risen to 2.5%, while the latest US CPI has decreased to 2.8%. This shift in inflation is questioning the dollar’s continued strength we observed last year. As a result, markets are starting to expect a more aggressive European Central Bank, with futures showing a 60% chance of a rate hike by the second quarter. On the other hand, there are growing expectations for a Federal Reserve rate cut in the latter half of 2026. The policy shift we predicted now appears to favor the euro.

    Positioning for Further Upside

    In the upcoming weeks, this suggests that traders position themselves for further gains in EUR/USD using derivatives. Buying call options with strike prices around 1.1950 and 1.2000 offers a way to capture potential profits with limited risk. More cautious traders might look into bull call spreads to reduce the initial premium cost. The narrative of a stronger eurozone economy, which we anticipated earlier, is now unfolding. Last week, the flash Eurozone PMI exceeded expectations at 51.2, indicating economic growth and supporting the euro. This stands in contrast to the weaker economic data from the US. Create your live VT Markets account and start trading now.

    here to set up a live account on VT Markets now

    see more

    Back To Top
    server

    Hello there 👋

    How can I help you?

    Chat with our team instantly

    Live Chat

    Start a live conversation through...

    • Telegram
      hold On hold
    • Coming Soon...

    Hello there 👋

    How can I help you?

    telegram

    Scan the QR code with your smartphone to start a chat with us, or click here.

    Don’t have the Telegram App or Desktop installed? Use Web Telegram instead.

    QR code