Market conditions for the euro appear mixed. While the euro experienced gains earlier in the month due to dollar weakness stemming from policy uncertainty in the US and positive Eurozone economic data, it is now facing headwinds as the dollar regains momentum. Speculation regarding the next Federal Reserve Chairman and hopes of avoiding a government shutdown in the US are contributing to the dollar’s resurgence, putting downward pressure on the EUR/USD pair.
- Euro settled at $1.19 at the end of January, a 1.5% gain over the month.
- Eurozone economy expanded 0.3% in Q4 2025.
- ECB policymaker warned that further euro strength could prompt interest-rate cuts.
- EUR/USD slipped towards 1.1920–1.1910 area as the US dollar regains momentum.
- Kevin Warsh may be the next Federal Reserve Chairman.
- US Senate Democrats and Republicans have reached an agreement on a package of spending bills.
The euro’s recent strength, driven by positive economic data and dollar weakness, may be challenged by a recovering US dollar. The potential for a new Federal Reserve Chairman seen as prioritizing central bank independence, combined with progress in avoiding a US government shutdown, are boosting the dollar. This renewed strength of the dollar could limit further gains for the euro and potentially lead to a period of consolidation or even a decline in its value. The possibility of ECB intervention to curb further euro appreciation adds another layer of uncertainty for the currency.