The Euro stayed weak against the US Dollar this week. A rebound from 1.1805 ran out of steam below 1.1850. EUR/USD then slipped toward 1.1835 after reports that ECB President Christine Lagarde may leave before her term ends in October 2027.
A Financial Times report on Wednesday said Lagarde is considering stepping down ahead of the French elections in April 2027. The report said this would allow Emmanuel Macron and Friedrich Merz to choose a successor.
Fed Minutes And Key Data In Focus
Markets were mostly quiet as traders waited for the minutes from the Federal Reserve’s January meeting, due later on Wednesday. US Q4 GDP and the January PCE Price Index are due on Friday, and could drive near-term moves.
EUR/USD support is near 1.1800. The trend remains bearish while price stays below the broken trendline around 1.1880. On the 4-hour chart, MACD is below zero and RSI is 43, still under the midline.
Resistance is at 1.1855, then 1.1880–1.1890. That area includes the trendline, the February 12 and 13 highs, and the 38.2% Fibonacci retracement. Support sits at 1.1805, then 1.1765.
Earlier in 2025, the Euro also struggled against the Dollar, as rumors about Lagarde’s departure pushed the pair toward 1.1800. Today the picture is very different. EUR/USD trades much lower and is struggling to hold 1.0750. The story has shifted from political uncertainty to a clear focus on diverging central bank policy.
Rate Differentials Drive The Trend
The main reason for the weakness is still the large interest rate gap between the US Federal Reserve and the European Central Bank. The Fed funds rate remains at 5.25%–5.50%, while the ECB deposit facility rate is 4.00%. Higher US yields continue to support the Dollar. This gap makes it costly to bet against the USD and keeps steady downward pressure on EUR/USD.
Recent data supports this view, so a quick reversal looks unlikely. January 2026 inflation showed Eurozone CPI at 2.6%. It is still above the ECB’s target, but clearly trending lower. In the US, the latest PCE inflation came in at 2.7%, which gives the Fed little reason to cut rates soon.
For derivatives traders, this ongoing uncertainty makes buying simple calls or puts a higher-risk approach. Many traders are instead using volatility strategies, such as straddles, ahead of major data releases. One-month implied volatility for EUR/USD options is around 6.5%. That is higher than last year and shows the market is pricing in a larger move.
Next, attention turns to preliminary February inflation readings from major Eurozone economies and the next US jobs report. These releases will shape expectations ahead of the March central bank meetings. Any surprise could become the next major catalyst for the pair.
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