EUR/USD traded near 1.1800 on Thursday and was little changed. It briefly dipped after comments from ECB President Christine Lagarde. Speaking to the European Parliament, she said inflation is moving toward the 2% target over the medium term. Lagarde said food inflation should keep easing and settle slightly above 2% by late 2026. She added that the ECB will remain data-dependent and ready to adjust as needed.

Eurozone Sentiment And Inflation Outlook

Eurozone surveys sent mixed signals. The Economic Sentiment Indicator fell to 98.3 in February from a revised 99.3 in January. Consumer Confidence improved to -12.2, but it remained negative. Markets now look to preliminary German CPI data due on Friday. This report could shape near-term expectations for Eurozone inflation. The US Dollar strengthened, with the Dollar Index near 97.70. Investors weighed continued uncertainty around US trade policy after a US Supreme Court ruling challenged parts of President Donald Trump’s tariff framework. Still, markets expect Washington to maintain current trade agreements. Traders largely expect the Federal Reserve to keep rates unchanged at upcoming meetings. Weekly Jobless Claims due later may provide more insight into US labour market conditions.

One Year Ago Versus Today

A year ago, EUR/USD was holding near 1.1800 as the European Central Bank signalled that inflation was under control. Today, the picture is different. The pair is now trading near 1.0750 as the policy gap between central banks has widened more than expected back in 2025. For traders, this interest rate difference is now the key driver. The ECB’s early-2025 optimism has run into stubborn price pressure. January 2026 inflation in the Euro Area held at 2.5%, and German CPI came in even higher at 2.8%. As a result, markets are no longer expecting imminent rate cuts. This supports options strategies that favour a range-bound market or a weaker Euro, since the ECB may keep its main rate at 4.25% for longer than previously expected. In the United States, attention has shifted away from the trade-policy debate of 2025 and toward a “higher for longer” rates outlook. US CPI inflation is still running at 3.1%, giving the Federal Reserve little reason to ease. With the Fed Funds Rate at 5.50%, the dollar’s yield advantage continues to draw capital and weigh on EUR/USD. This policy split is also creating clearer opportunities in volatility markets. One-month implied volatility for EUR/USD options has risen to 8.2%, up from the quieter levels seen through much of last year. That backdrop can make strategies such as straddles or strangles more attractive, since they can benefit from a large move in either direction around major data releases. In the weeks ahead, markets will watch Eurozone flash manufacturing PMI data and the next US jobs report. Last year’s mixed sentiment has shifted into a clearer story: slower growth in Europe versus a more resilient US economy. Any data that challenges that view could become the next major catalyst for the pair. Create your live VT Markets account and start trading now.

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