EUR/USD has recovered all of its March losses and has moved back to around 1.18. This came as markets reduced expectations for an ECB rate rise in April, while a June rise remains fully priced.
The ECB is expected to keep the option of a rate rise open while it assesses different outcomes. The minutes from the 19 March ECB meeting are due, followed by comments from several ECB speakers in Washington.
ING says it is cautious about buying EUR/USD at current levels around 1.18. It sees a possible fall back towards 1.1700 if negative news emerges.
The article states it was produced with help from an artificial intelligence tool and reviewed by an editor.
Looking back to this time in 2025, we saw EUR/USD recover to 1.18 as the market looked past an April rate hike from the European Central Bank. The ECB did deliver that priced-in June hike, but the landscape today is vastly different. We are now navigating a world where central bank policy is diverging sharply.
Currently, with EUR/USD trading around 1.0850, the debate has completely shifted from hikes to the timing and pace of cuts. Recent Eurozone inflation data for March 2026 came in at 2.6%, slightly hotter than expected but still on a clear downward path from the cycle highs. This contrasts with stickier US inflation, which latest readings show holding above 3%, keeping the Federal Reserve on hold.
For derivative traders, this divergence creates opportunities in directional bets. Given the ECB is expected to cut rates before the Fed, buying EUR/USD put options with strikes around 1.0700 for June expiry offers a clear way to position for further downside. This strategy allows traders to profit from a falling euro while strictly defining their maximum risk to the premium paid for the option.
Volatility is also a key consideration, as implied volatility for EUR/USD has ticked up to 7.8% from lows around 6% seen earlier this year. For those believing the pair may consolidate before the next major move, selling a strangle by writing out-of-the-money puts and calls could be effective. This position profits from time decay as long as the currency pair remains within a defined range.
Just as we were cautious about chasing the rally up to 1.18 in 2025, traders now should be wary of a significant rebound without a fundamental shift. The main risk to a bearish euro position is a sudden weakening in US economic data, which would accelerate Fed rate cut expectations. This could cause a sharp upward move in the pair, squeezing short positions.
