EUR/USD fell on Wednesday. It traded near 1.1817, down almost 0.25%. The Euro weakened after a Financial Times report said ECB President Christine Lagarde may leave before her term ends in October 2027. There is no official confirmation.
US data also supported the Dollar. Industrial Production rose 0.7% in January, above the 0.4% forecast, after a revised 0.2% increase in December. Durable Goods Orders fell 1.4% in December versus a 2% forecast, after a 5.4% jump in November. Orders excluding Defence dropped 2.5% after a 6.6% gain. Core orders excluding Transportation rose 0.9%, above the 0.3% forecast.
Dollar Momentum Builds
Building Permits rose to 1.448 million in December from 1.388 million, above the 1.40 million forecast. Housing Starts increased to 1.404 million versus 1.33 million expected, up from 1.322 million.
The Dollar Index climbed to about 97.45, up nearly 0.35%, as attention shifted to the FOMC January minutes. The Fed held rates at 3.50%–3.75% in a 10–2 vote. Since then, January NFP rose to 130K from 48K. Unemployment eased to 4.3% from 4.4%. CPI was 0.2% m/m, and inflation cooled to 2.4% y/y from 2.7%. Markets are pricing in about 60 basis points of cuts later this year.
The date today is 2026-02-18T20:41:53.721Z.
Right now, the market is pushing against the Fed, but the data supports the Fed’s stance. Strong US Industrial Production and housing data are keeping demand for the Dollar firm. This points to a higher Dollar in the short term.
All focus is now on the upcoming FOMC minutes for signals on policy. Inflation has cooled to 2.4%, but the labor market is still holding up, with payrolls at 130K. If the minutes sound hawkish, it could challenge the market’s expectation for rate cuts.
Positioning For Fed Risk
Markets are pricing in around 60 basis points of rate cuts for later this year. That may be too soon. In late 2023, traders priced in more than 150 basis points of cuts for 2024, but strong data forced a sharp repricing. This suggests the market may be moving too far ahead again.
Meanwhile, the Euro faces added pressure from uncertainty around ECB leadership. This risk in Europe is another reason EUR/USD could trend lower, with the pair currently near 1.1817. A stronger Dollar and a weaker Euro add to the downside pressure.
Over the next few weeks, we favor positioning for Dollar strength and Euro weakness. Buying EUR/USD put options can capture downside while limiting risk ahead of the Fed minutes. Given the event risk, a bear put spread may also help reduce upfront cost.
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