EUR/USD Above 1.10
EUR/USD has moved back above 1.10 due to a weakening USD. EUR is seen as a more favourable option in times of USD instability, given its liquidity and status as a reserve currency.
The euro’s position is bolstered by the potential for a European Central Bank (ECB) rate cut, while the dollar could suffer significantly from recession risks.
Recent developments may lead to increased volatility in FX markets, particularly with ongoing tariff discussions. If EUR/USD surpasses the 1.100 mark, it may find additional support.
We’ve just seen EUR/USD trade back above the 1.10 threshold, aided largely by a softer US dollar. This shift didn’t arrive in a vacuum. It reflects renewed investor appetite for alternatives when dollar weakness becomes evident. With this pair moving towards levels not seen in recent months, the dynamic is now skewed in favour of the euro, particularly given its relative resilience and attractiveness in uncertain conditions.
The euro has emerged as a steadier option against the greenback, partly because of its role as a core reserve currency but more so due to expectations that the European Central Bank is nearing the end of its tightening cycle. Market chatter around a potential rate reduction from the ECB, combined with economic figures showing declining inflationary pressures across the eurozone, have offered support to this sentiment. The thinking here is simple: when policy becomes more predictable, currencies tied to those banks tend to benefit.
The Dollar’s Fragility
Now, looking at the dollar side, concerns aren’t hard to find. With several indicators signalling economic slowdown in the US, markets have begun re-evaluating earlier assumptions of resilience. Growing speculation around US recessionary pressures and potentially sharper than expected rate cuts by the Federal Reserve have put the dollar on more fragile footing. And when the dollar exhibits that fragility, positioning tends to favour pairs like EUR/USD, where liquidity is high and political risk broadly comparable.
There’s another layer to this story though—trade tensions. Tariff negotiations involving key global players have introduced additional skittishness into the currency space. These talks aren’t about dramatic headlines just yet, but they do affect longer-term risk assessments. If restrictions deepen, safe but still liquid currencies could see renewed flows. That doesn’t mean a rush towards defensive assets in general, but rather a tilt away from those most sensitive to trade disruptions.
With EUR/USD recently punching through the 1.100 level again, we’re watching for whether this turns from just a breach to a base. A stabilisation above this mark could prompt follow-on buying. Traders who are long the pair will be watching closely for action around the 1.1030–1.1050 range, which has held relevance in past months. A lack of follow-through up there might stall momentum temporarily, but dips are looking more supported than sold right now.
As for volatility, expectations are creeping higher. This is partly down to the broader themes—monetary policy divergence, weaker US data—but also because of the ticking calendar. We’re entering a window where central banks globally tend to become more active in forward guidance. Even small surprises from policymakers or data releases could add short bursts of directional risk.
What this means, at least in the short term, is that options markets are likely mispricing the odds of higher realised vol. Hedging costs remain moderate, but not for long. If there’s one thing we’ve learned in recent cycles, it’s that when vol starts rising, it doesn’t always wait for confirmation.
So attention turns now to any incoming comments from central bank figures that might adjust timelines or expectations. Even a shade more dovishness from European officials could alter the pace of EUR gains. Meanwhile, if upcoming Fed speakers sound more concerned than before, or if employment and inflation data undershoot, the dollar may pare back further. These aren’t hypotheticals. They’re within reach of current consensus projections.
In practice, we need to be nimble. Delta and gamma positioning in EUR/USD are becoming more influential with price this close to new ranges. There is little reason to expect calm trading sessions until key macro data surprises in one direction. Until then, fading sharp moves into resistance or support may work for intraday flows, but conviction on either side seems reserved for longer-term players awaiting broader confirmation.
