EUR/USD slipped to about 1.1770 on Thursday, down 0.24%, ending an eight-day run of gains. The US Dollar rebounded modestly as risk sentiment stayed supported, easing recent selling pressure.
Revised Eurozone data showed HICP inflation rose 1.3% MoM in March, up from 0.6% in February and above the 1.2% estimate. Annual inflation was revised to 2.6% from 1.9%, the highest since July 2024, while core inflation eased to 2.3% YoY from 2.4%.
The rise in headline inflation was mainly linked to energy prices, pointing to upward pressure from commodities. The ECB’s next policy meeting is scheduled for 29–30 April.
ECB officials have kept a cautious stance on rates. Christine Lagarde said the ECB must remain “completely agile” and stated there is no bias towards tightening, while François Villeroy de Galhau said it is premature to focus on a rate rise in April and that more data are needed.
Reuters reported markets almost fully price a first 25-basis-point rate rise by June, with another possible later in the year. In the US, DXY traded near 98.25 after an intraday low of 97.83, close to six-week lows.
US Initial Jobless Claims fell to 207K versus 215K expected, while Industrial Production dropped 0.5% MoM in March versus a 0.1% rise forecast. The Philadelphia Fed index rose to 26.7 in April from 18.1.
Later, speeches from ECB officials Joachim Nagel and Philip Lane are due.
Looking back to this time in 2025, we recall the EUR/USD rally stalling around 1.1770 as markets began anticipating a shift from the European Central Bank. The market was correctly pricing in a rate hike for June 2025, which the ECB delivered as it began its tightening cycle to combat rising inflation. That initial move was the start of a trend that has brought us to where we are today.
As of April 2026, the situation has evolved, with the ECB’s deposit rate now at 3.50% after several hikes through late 2025 and early 2026. While headline inflation in the Eurozone has cooled slightly to 2.8% for March 2026, the focus has shifted to stubbornly high core inflation, which printed at 3.1%. This stickiness in core prices suggests the ECB’s job is not finished, creating uncertainty and opportunity.
In contrast, the US Federal Reserve has held its policy rate steady at 5.25% for the last two quarters, as US core PCE inflation has shown more consistent signs of cooling, recently hitting 2.9%. This policy divergence, where the ECB may still need to tighten while the Fed is on a prolonged pause, creates a supportive backdrop for the Euro. Given this dynamic, the EUR/USD has already climbed and is now trading near 1.2150.
For traders, this suggests that long volatility strategies on the EUR/USD could be beneficial. The uncertainty surrounding the ECB’s next move, contrasted with the Fed’s steady stance, could lead to sharp movements around key data releases. Buying options, such as straddles or strangles, could capitalize on any surprising hawkishness from ECB officials in the coming weeks.
We must also consider the risk of a slowdown in the Eurozone economy, which could force the ECB to pause its hiking cycle prematurely. Recent data, such as the 0.8% fall in German industrial production for February 2026, indicate that economic activity is fragile. Therefore, traders might consider using bull call spreads on the EUR/USD, which offer a defined-risk way to bet on further upside while limiting losses if economic weakness suddenly alters the ECB’s path.
