The euro fell against the US dollar for a fourth straight day. It traded below 1.1860 after hitting a weekly high of 1.1928. Even though Eurozone data was strong, risk-off trading took over.
Eurozone GDP rose 0.3% in Q4 and was up 1.4% year-on-year, beating the 1.3% forecast. Employment increased 0.2% versus 0.1% expected, with jobs up 0.6% year-on-year.
Sentiment stayed weak after comments about AI and white-collar jobs. This came after another drop on Wall Street. The cautious tone carried into Asia and supported the US dollar.
In the US, Initial Jobless Claims fell by 5K to 227K, but that was still above the 222K forecast. Existing Home Sales fell 8.4% in January.
Trading was quiet ahead of US January CPI data. Headline CPI is expected at 2.5% year-on-year versus 2.7% in December. Core CPI is seen at 2.5% versus 2.6%.
We saw a similar setup in February 2025. The euro was stuck below 1.1860 even as Eurozone GDP surprised to the upside. Markets were in a risk-off mood, driven largely by fears about AI replacing white-collar jobs. Just like today, the main focus was the upcoming US inflation report.
Those AI fears have eased. Over the past year, investors have focused more on productivity gains than on immediate, large-scale job losses. Instead, attention has shifted back to a key driver: the different paths of the Federal Reserve and the European Central Bank. This policy gap is now the main force behind currency moves.
Recent data shows US inflation is still sticky. The January 2026 CPI came in at 2.9%, above the Fed’s 2% target, which has slowed expectations for rate cuts. In contrast, Eurozone inflation has cooled faster and is now 2.2%, giving the ECB more room to cut sooner. This helps explain why EUR/USD is trading near 1.0750, well below levels from a year ago.
Because the Fed remains cautious while the ECB sounds more dovish, the US dollar may stay stronger versus the euro. Higher US rates for longer continue to support the dollar. For now, EUR/USD still looks biased to the downside.
With that view, it makes sense to consider ways to profit from, or hedge against, a falling EUR/USD. Buying euro put options can limit risk while protecting against further declines. Another approach is to short EUR/USD futures, aiming for more downside ahead of the next central bank meetings.
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