NBC strategists expect an uneven near-term outlook for the euro due to elevated geopolitical risk, still-high energy prices, and weak growth. They say these factors could leave EUR\/USD open to short spells of risk-off weakness. <\/p>\n
They describe the European Central Bank as staying in a holding pattern. The Governing Council has noted higher upside inflation risks and higher downside growth risks, while longer-term inflation expectations remain anchored. <\/p>\n
NBC still forecasts modest EUR\/USD gains by year-end as conditions settle and the ECB remains cautious rather than dovish. They add that the euro\u2019s valuation offers less support than before, with its real effective exchange rate close to its long-term average. <\/p>\n
They outline a two-stage path for the currency. First, possible short-term weakness if geopolitical risk keeps energy prices high and reduces risk appetite, then modest appreciation into year-end as the shock is absorbed.<\/p>\n
Given the uneven outlook for the Euro, we see the currency facing near-term headwinds from geopolitical tensions and stubbornly high energy prices. With Dutch TTF natural gas futures creeping back up over \u20ac35 per megawatt-hour last week, the risk of short-term weakness in the EUR\/USD pair remains elevated. This leaves the pair exposed to pullbacks, especially during periods of low market risk appetite.<\/p>\n
Recent data confirms this delicate balance, as the Eurozone’s first-quarter GDP for 2026 came in at a sluggish 0.1%, while April’s inflation was sticky at 2.5%. This puts the European Central Bank in a holding pattern, unable to aggressively fight weak growth without stoking inflation. Therefore, we expect the ECB to remain patient, which provides a floor for the currency but limits its immediate upside.<\/p>\n
We believe the easy gains from a cheap valuation are behind us, as the Euro\u2019s real effective exchange rate is now hovering close to its long-term average. This means any appreciation from here will need to be driven by an improvement in economic fundamentals, not just a reversion to the mean. The currency is no longer on sale, so traders should expect a grind higher rather than a sharp rally.<\/p>\n
Looking back at the volatility in 2025, we saw a similar pattern where the Euro weakened on energy price scares before gradually recovering as the market absorbed the shock and the ECB held firm. That experience suggests that while a dip below 1.0700 is possible in the coming weeks, it may represent a buying opportunity for those with a longer horizon. This historical precedent supports a two-stage view for the rest of the year.<\/p>\n
For the next several weeks, a prudent strategy would be to hedge against downside or sell out-of-the-money call options with June and July 2026 expiries. This approach allows traders to collect premium while acknowledging the high probability that the Euro will remain range-bound due to the conflicting economic signals. It positions for sideways movement or a slight dip before any sustained recovery can take hold.<\/p>\n
For the second half of the year, we anticipate a modest appreciation towards the 1.1000 to 1.1200 range as the policy backdrop stabilizes. Traders could begin to position for this gradual climb by acquiring long-dated, risk-defined structures like bull call spreads for the December 2026 expiry. This strategy provides exposure to the expected upside while capping potential losses if the near-term risks persist longer than anticipated.<\/p>\n","protected":false},"excerpt":{"rendered":"
NBC sees euro uneven near-term on geopolitical risks, high energy prices, weak growth; modest year-end gains expected.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-46633","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46633","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=46633"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46633\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=46633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=46633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=46633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}