EUR/USD edged up to about 1.1810 in late Asian trade on Friday, before Germany releases preliminary February inflation figures from the federal level and major states.
Germany’s flash HICP is forecast at 0.5% month-on-month after -0.1% in January, with the annual rate at 2.1%. The report said the data may have limited effect on the Eurozone rate path after ECB President Christine Lagarde cited inflation moving towards the 2% aim.
Eurozone Inflation And Ecb Outlook
Lagarde also said rate decisions will depend on the inflation outlook and related risks. She added the ECB will keep a data-dependent, meeting-by-meeting approach.
The US Dollar eased before the US Producer Price Index release at 13:30 GMT. The Dollar Index (DXY) was down 0.1% near 97.65.
The report said markets will watch PPI for updated inflation signals, which could affect the Federal Reserve’s policy view. It noted some Fed officials have supported keeping rates steady for now, due to inflation risks.
Strategy Implications For Eur Usd
The divergence we were watching this time last year, when the EUR/USD was trading near 1.18, has now fully played out. As of today, February 27, 2026, the pair is struggling to hold above 1.08, a significant drop reflecting differing economic paths. The Fed’s focus on upside inflation risks in 2025 proved prescient, while the European Central Bank faced a faster-than-expected cooling.
Last year’s ECB confidence in inflation stabilizing has now translated into a more pressing need to stimulate a sluggish economy. Recent Eurostat figures show Eurozone core inflation has fallen to 2.5%, well below the US equivalent, which remains sticky at 2.9%. This data reinforces our view that the ECB will be forced to cut interest rates before the Federal Reserve does.
Given the uncertainty around the exact timing of these central bank pivots, we should consider buying volatility. Purchasing EUR/USD straddles with expirations in the next quarter allows us to profit from a significant price move, regardless of the direction. Key triggers will be the upcoming central bank meetings in March and the next inflation data releases.
For those with a directional bias, the continued weakness in the German economy suggests further downside for the Euro. German industrial production contracted by 1.6% in the latest report from Destatis, signaling a poor start to 2026. Therefore, buying EUR/USD put options provides a clear, risk-defined way to position for a drop towards the 1.05 level.
The primary theme for the coming weeks is the race to cut rates. We can use futures to take a more direct position, but the choppy environment means risk management is critical. The key question is not if the central banks will cut, but who moves first and by how much.
