The euro is currently experiencing downward pressure against the US dollar, trading at a multi-week low. Economic data from the Eurozone reveals fragile growth in Germany and inflation at the ECB’s target, leading to expectations of steady interest rates. Meanwhile, stronger US retail sales are boosting the dollar, even with slower-than-anticipated US inflation. Diverging central bank policies contribute to the euro’s weakness.
- The euro fell to its weakest level in over a month against the US dollar, trading at $1.163.
- Germany’s economy grew 0.2% in 2025, ending a two-year contraction, but manufacturing weakness persists.
- Eurozone inflation slowed to 2.0% in December, meeting the ECB’s target.
- ECB member François Villeroy de Galhau considers expectations of a rate hike in 2026 as “fanciful.”
- Stronger-than-expected US retail sales boosted the US dollar.
- The EUR/USD pair is regaining upside impulse, extending its bounce to the 1.1630 region, on the back of renewed selling pressure on the US Dollar.
- Markets are pricing just over 4 basis points of easing this year, consistent with an ECB that sees little urgency to act.
- Speculative positioning continues to favor the Euro (EUR), with momentum starting to rebuild.
- Attention turns to Friday’s batch of US hard data, which should offer a clearer snapshot of the economy’s underlying health.
- If US yields go up again or the Fed’s outlook becomes more hawkish, new sellers could quickly join the pair.
Overall, the asset faces challenges due to a combination of factors. Economic recovery in the Eurozone is tentative, and the central bank is expected to maintain its current monetary policy. Conversely, the US dollar is gaining strength from positive economic data and expectations surrounding the Federal Reserve’s future actions. This divergence in economic conditions and central bank policies suggests that the euro may continue to experience downward pressure in the near term, particularly if US economic data remains strong and the Federal Reserve adopts a more hawkish stance.