Euro Hovers at $1.1850 as ECB Ok Single Currency Strengthen
The euro hovered around $1.1850 on Monday, staying close to a four-year peak above $1.20 reached in late January, supported by signals that the European Central Bank (ECB) is largely comfortable with the currency’s recent strength.
The euro traded quietly, even if choppily, ahead of the weekend. A break of last Wednesday’s range of approximately $1.1835-$1.1925 may signal the direction of the next 0.5-1.0-cent move.
Chief Market Strategist at Bannockburn Capital Markets, Marc Chandler, states in a note that the firm’s bias is for a higher breakout. It is in about a fifth of a cent range today, below $1.1880.
At the February policy meeting, ECB President Christine Lagarde said the euro area’s inflation outlook is in a “good place,” while cautioning against overreacting to short-term or volatile data.
The single currency also found support from reports that Bank of France Governor François Villeroy de Galhau, viewed as a dovish policymaker, will step down in June, well before his term was set to expire in October 2027.
On the data front, Eurozone industrial production fell 1.4% in December, broadly in line with expectations. In the US, inflation slowed more than anticipated to 2.4% in January, reinforcing the view that the Federal Reserve may have scope to ease policy.
Investors now await the release of the Fed’s meeting minutes on Wednesday for further guidance on the monetary policy outlook.
Standard Chartered raised its 2026 euro-area growth forecast marginally. However, the region’s growth prospects are muted given trade pressures – both from US tariffs and increasing competition from China – and the uneven picture across euro-area economies.
Resilient consumer spending and the positive spillover from Germany’s fiscal stimulus should provide growth tailwinds, although the boost from stimulus is unlikely to be fully apparent until 2027.
The bank thinks inflationary pressures in the euro area are skewed to the downside, given weaker US demand for the region’s exports and cheaper imports from China due to trade diversion.
Analysts expect the ECB to deliver only one more 25bps rate cut in 2026, given stronger-than-expected 2025 growth, a resilient labour market and consumer spending, and limited Fed rate cuts. “We also see a risk that the ECB may have already finished its cutting cycle”, Standard Chartered said. UBA Climbs to N2.1trn as Investors Bet on Earnings Outlook
