EUR/USD could not extend its overnight rebound from 1.1835–1.1830. It traded in a tight range in Asia on Thursday. The pair was near 1.1875, little changed on the day, and close to the one-week high set on Tuesday. After Wednesday’s strong US Nonfarm Payrolls report, markets scaled back expectations for faster Federal Reserve easing. Comments from Kansas City Fed President Jeffrey Schmid also supported the dollar. He warned that more rate cuts could keep inflation higher for longer. This helped the US dollar hold above a nearly two-week low and kept pressure on EUR/USD.

Fed Cuts And Dollar Support

Markets still expect at least two 25 bps Fed cuts in 2026. However, worries about the Fed’s independence and a broadly positive risk mood reduced demand for the safe-haven dollar. The euro is supported by expectations that the European Central Bank will keep rates unchanged for the rest of the year. There is no major Eurozone data due on Thursday. US Weekly Initial Jobless Claims are due later. Focus then shifts to Friday’s US consumer inflation data. These figures are likely to shape expectations for the Fed’s rate path and drive the next move in EUR/USD. EUR/USD remains stuck in a range, and we see little reason to take a strong directional view before tomorrow’s US inflation report. Yesterday’s strong jobs report, which showed 280,000 new jobs in January, gives the Fed room to stay cautious. That is why the dollar is finding support and keeping the pair below 1.1900.

Trading Plans Around CPI

The key tension is that markets are pricing in two Fed cuts this year, while Fed officials still sound reluctant. This caution is understandable. Inflation stayed stubborn through much of 2025, with the annual rate averaging about 3.7%. That makes tomorrow’s inflation report critical to confirm whether disinflation is continuing. On the other side, the ECB appears firmly on hold, which supports the euro. Eurozone inflation was 2.9% in January, still too high to justify rate cuts. This policy gap is helping prevent a sharp drop in EUR/USD. With the pair range-bound, we should consider options strategies that can benefit from a large post-data move. Buying a strangle, for example, positions us to benefit from a volatility spike in either direction. This is a sensible approach ahead of a major data release. If tomorrow’s inflation is hotter than expected, we should be ready to buy EUR/USD puts. That would likely push back rate-cut expectations and strengthen the dollar. If inflation is softer, it would support the case for cuts, making EUR/USD calls more attractive. The market will likely react quickly to any surprise versus the expected 0.3% monthly rise. Over the next few weeks, we should be prepared for the 1.1830–1.1900 range to break. Inflation data will likely set the tone by confirming or challenging the market’s view on two cuts. We will use the market’s reaction to set a new directional bias for the rest of the quarter. Create your live VT Markets account and start trading now.

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