EUR/USD ticked higher on Thursday, ending a two-day slide. It traded near 1.1883, up about 0.10%. The US Dollar Index was around 96.80, close to two-week lows, as markets waited for US CPI data due on Friday.
US data showed Initial Jobless Claims fell to 227K from 232K, but came in above the 222K forecast. Continuing Claims rose to 1.862 million from 1.841 million. January Nonfarm Payrolls rose by 130K versus a 70K forecast, and the Unemployment Rate eased to 4.3% from 4.4%.
Fed Policy And Dollar Outlook
Markets were pricing roughly 50 basis points of Fed rate cuts in the second half of the year. Kansas City Fed President Jeffrey Schmid said inflation is near 3% and that policy should stay restrictive.
In the Eurozone, attention turns to Q4 preliminary Employment Change (QoQ) and GDP data due on Friday. A Reuters poll dated February 9-12 found that 66 of 74 economists expect the ECB deposit rate to hold at 2.00% through 2026, with no change expected before 2027.
The euro is used by 20 EU countries. In 2022, it made up 31% of global FX turnover, with average daily volume above $2.2 trillion. EUR/USD accounts for about 30% of all FX transactions.
The picture on February 12, 2026 looks very different from market sentiment in 2025. The US Dollar is no longer weak. The Dollar Index (DXY) is trading firmly near 104.50, far above the 96.80 level seen last year. Much of this strength comes from a Federal Reserve that has kept interest rates steady.
Derivatives Positioning And Risk Factors
The 50 bps of easing that markets expected in 2025 did not happen. Inflation stayed stickier than forecast. January’s CPI report, released yesterday, showed core inflation holding at 2.8%. This keeps pressure on the Fed to remain restrictive. The Fed funds rate is currently 4.75% to 5.00%, which supports the dollar because it offers higher yield.
The Eurozone story is different. Growth has been weak. Final Q4 2025 GDP confirmed only 0.1% quarterly growth. The European Central Bank has also been more cautious than the Fed, keeping its deposit rate at 3.25%. This policy gap is a key reason EUR/USD is under pressure. The pair now trades near 1.0550, well below the 1.1883 level discussed at the same time last year.
For derivatives traders, this backdrop still supports strategies that position for euro weakness. One approach is to buy EUR/USD put options, especially with strikes below 1.0500, to target more downside from the rate gap. The latest US January Nonfarm Payrolls report, which showed 195,000 jobs added, also strengthens the case for a resilient US economy and a firm dollar.
Given the policy split, another strategy is to sell out-of-the-money EUR/USD call options to earn premium, since a large rally may be hard to sustain without a clear shift from the Fed or the ECB. Traders should still watch for softer US labor data or a surprise rise in Eurozone inflation, as either could change the trend. For now, momentum continues to favor a weaker euro.
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