Where we are: EUR/USD is currently trading around 1.1705, having broken above the overnight high of 1.1695. The pair held a tight range overnight, finding support near 1.1670. This level is just above the prior NY close of 1.1665, with the break above suggesting building bullish momentum heading into the New York open.
What’s driving it: The Euro is catching a bid as market participants are increasingly pricing in a June rate cut by the ECB. ECB speakers are walking a fine line, but the recent 25bp cut at the April 17th meeting, combined with the mild easing bias, keeps the pressure on. While Kazimir is pushing back against this narrative, suggesting a June rate hike is “all but inevitable,” the market is clearly leaning the other way, especially given the Eurozone HICP at 2% and Core HICP at 2.3%. We believe the market is pricing in a higher probability of continued easing as the data trajectory leans dovish.
- The ECB’s Survey of Professional Forecasters for Q2 2026 showing that Euro-Zone inflation is seen as temporary supports the doves’ argument for further easing.
- Speculator positioning in EUR is modestly long at +35,712 contracts, but this is at the 10th percentile over the last 52 weeks, suggesting squeeze risk is relatively low.
- The rise in oil prices (WTI Crude at $99.89) could add to inflationary pressure, potentially staying the ECB’s hand.
NY session focus: The 08:30 ET data dump will be crucial; watch for reactions in the US 2Y (currently 3.88%) and 10Y (4.4%) yields. A soft print would likely accelerate the Euro bid, targeting the 1.1750 level. A strong print would test the resolve of the ECB easing narrative, potentially pushing EUR/USD back towards 1.1650. The trade that’s working right now is fading hawkish ECB rhetoric and buying dips. The trade at risk is shorting EUR/USD ahead of potential upside surprises. The pain trade for EUR/USD is a hawkish repricing by the ECB, fueled by a significant re-acceleration in services inflation.