EUR/USD has held steady, even as EU–US trade policy remains uncertain. The pair is trading above what interest-rate differentials suggest, which implies that a large part of the US policy risk is already priced in.
In the weeks ahead, EUR/USD is expected to drift back toward the top of its recent range. It is not expected to make new highs.
Policy Risk Largely Priced In
Expansionary fiscal policy and a pickup in production could support the euro. However, weak wage growth and the lack of a strong credit cycle are likely to limit further gains.
The European Central Bank’s impact on the euro is expected to be small. No ECB rate changes are expected through 2026.
EUR/USD appears stable despite continued EU–US trade discussions that dominated headlines in late 2025. With the pair trading near 1.0850, much of the US policy risk looks to be reflected in the current price. We expect the pair to edge higher toward the top of its recent range over the coming weeks.
Support for the euro comes from fiscal measures still working through the economy and a modest recovery in industrial output. For example, the Eurozone Manufacturing PMI for January 2026 rose slightly to 50.2, which signals mild expansion. On its own, however, this is unlikely to trigger a strong rally.
Options Positioning For Range Bound Upside
The euro’s upside still looks capped by weak domestic fundamentals. Wage growth in Q4 2025 was a soft 2.8%, and the latest ECB bank lending survey shows credit conditions remain tight. With the ECB not expected to change rates this year, a clean break above 1.1100 looks unlikely.
With that backdrop, selling out-of-the-money puts may be a way to collect premium while betting the pair will not fall sharply. A more direct approach is to use bull call spreads for March or April expiries. For example, buying a 1.09 call and selling a 1.11 call targets a modest rise while keeping risk defined.
This spread fits the view that EUR/USD can move toward the top of its range without breaking above it. The short 1.11 call helps pay for the 1.09 call, which can lower the overall cost. It also helps protect against the risk that weak wage and credit growth keeps the pair from moving into a higher trading range.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
