EUR/USD Eyes 1.17 as ECB-Fed Policy Spread Widens
EUR/USD probes 1.17 as the ECB stays hawkish and the incoming Warsh Fed leaves the door open for cuts. The real-rate spread is back leaning toward the euro.
Where We Are
EUR/USD is grinding toward the 1.17 handle, the last meaningful resistance before a clean path into the 1.18s. The driver is not raw dollar weakness — it is the widening divergence between an ECB still refusing to commit to another cut and a Fed about to be chaired by Kevin Warsh, whose Friday handover is being read as a softer reaction function on growth wobbles.
What ECB Hawks Are Giving the Euro
Lagarde's recent messaging has been consistent: core inflation sticky, wage growth not yet through, no automatic path to further cuts in H2. That keeps the real-rate spread across the Atlantic euro-friendly, so long as the Fed does not surprise hawkish to what is already priced in.
What Warsh's Fed Is Taking From the Dollar
Wednesday's FOMC minutes caught desks offside — internal concern on labor softness, and a perceived lower Fed-put strike under Warsh. If the new Chair weights market stability less aggressively, the paradox cuts the other way: more room for rate cuts when the data wobbles. That dovish-by-omission read is what bid the euro into the close.
The Setup for Desks
- Long-EUR/USD bias stays intact while 1.1620 holds as support.
- A daily close above 1.1700 opens 1.1810 and then 1.1880 as the next zone.
- Risk: a hot NFP next week reverses Fed pricing and the trade unwinds fast — a stop below 1.1580 is the discipline.
What Decides This Week
- US PCE on Friday — a clean disinflation print keeps the euro bid.
- ECB speaker run (Lane, Schnabel) — Schnabel staying hawkish keeps the spread wide.
- Positioning — CFTC shows euro net-long but not yet stretched; no crowded-trade red flag.
The asymmetry favors probes above 1.17 with tight risk discipline. The next leg will not be decided by policy headlines — it will be set by the next inflation print on both sides of the Atlantic.