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    Pesole highlights Lagarde’s ECON testimony as markets expect ECB rates to stay unchanged through 2026; CPI is unlikely to shift EUR/USD 1.1750 support

    by VT Markets
    /
    Feb 26, 2026
    ECB President Christine Lagarde is due to speak to the ECON Committee of the EU Parliament today. She recently described ECB decisions as “agile,” while markets are pricing in unchanged interest rates through the end of 2026. CPI releases over the next few days may not move rate expectations much. For now, the short-term EUR:USD rate gap still works against EUR/USD.

    ECB Policy Outlook

    Confidence in the US dollar has not improved enough to point to a much bigger drop in EUR/USD. The 1.1750 level is seen as key support, unless tensions with Iran escalate sharply. ECB officials continue to stress flexibility, but markets still expect flat rates through 2026. January’s Eurozone CPI showed headline inflation at 2.3%, which is not high enough to force the ECB to change course. This supports the view that the ECB is likely to stay on hold for some time. The rate gap between the US and the Eurozone still favors the dollar. The US 2-year Treasury yield is around 4.50%, compared with about 2.75% for Germany’s 2-year. However, softer US data—such as the ISM Manufacturing index falling to 49.5—has limited dollar strength in the near term. That helps explain why markets have not been confident pushing EUR/USD much lower. In this low-volatility setup, selling options can make sense. We see 1.1750 as strong support, which makes it an appealing strike for selling weekly or monthly puts to earn premium. This strategy fits a market that is likely to stay range-bound.

    Key Risks To Monitor

    This kind of sideways trading became common throughout 2025 after the earlier aggressive rate-hike cycles ended. Traders should stay alert to major geopolitical headlines, especially around Iran. This is the main risk that could break the current calm, drive volatility higher, and put the 1.1750 support level under pressure. Create your live VT Markets account and start trading now.

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