Gediminas Šimkus, a policymaker at the European Central Bank (ECB), mentioned that inflation and growth risks are now leaning towards the downside. The ECB will need to take action if inflation in 2028 stays below its 2% target, making the price forecast for that year crucial for decision-making. During the session, the EUR/USD currency pair rose slightly, trading around 1.1700. The ECB, located in Frankfurt, Germany, impacts the Euro by adjusting interest rates and its monetary policy to ensure price stability.

Quantitative Easing And Tightening

Quantitative Easing (QE) is a tool the ECB uses during serious situations; it involves buying assets to boost liquidity, often leading to a weaker Euro. On the other hand, Quantitative Tightening (QT) means stopping these purchases, which helps strengthen the Euro, especially when the economy is recovering. Currently, the EUR/USD is falling towards 1.1650 as the US Dollar recovers. In addition, cryptocurrencies like Bitcoin and Ethereum are seeing a sell-off, causing over $1 billion in market liquidations. Several important economic events, such as CPI and PMI data releases, are expected to affect market trends in the coming week. Comments from ECB officials indicate increasing risks for both inflation and growth. This hints at a potentially more cautious approach from the central bank. For derivative traders, this raises the chances of downward pressure on the Euro in the upcoming weeks. Recent data supports this view; the flash estimate for September 2025 shows headline inflation dropping to 2.1%, just near the 2% target and on a downward trend. Additionally, recent Purchasing Managers’ Index (PMI) data for manufacturing has remained below 50, indicating contraction for the fourth month in a row. These factors validate the concerns about a slowing economy.

Strategies For Traders To Consider

We suggest that traders explore strategies that could benefit from a falling or stable Euro. Purchasing EUR/USD put options could directly position for a potential decline, providing a defined-risk way to bet against the currency. Alternatively, selling call spreads might be appropriate for those who believe the Euro’s upward movement will be limited. Looking back from our viewpoint in 2025, we saw a similar trend after 2015 when the ECB’s persistent dovish stance restrained Euro rallies for a long time. This historical pattern indicates that even mentions of future easing could pressure the currency before any actual rate cuts take place. Thus, any short-term strength in the Euro might create a good opportunity to initiate bearish positions. The attention now turns to the upcoming Eurozone flash PMI and CPI data. If these figures confirm the weakening trend, expectations for a rate cut in 2026 could grow, which may speed up a possible decline in the Euro. Volatility may rise around these data releases, offering chances for options traders to capitalize on short-term price movements. Create your live VT Markets account and start trading now.

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