ING analysts said the ECB’s expansion of the EUREP facility supports the euro’s international role and may affect EUR/USD. They linked this to higher reserve demand for euro assets and more use of the euro in trade invoicing.
They said debate is increasing on whether the ECB’s aim for a stronger international euro could mean tolerance for a stronger nominal euro. They said the ECB focus would be how a higher trade-weighted euro affects its inflation forecast and whether lower inflation would lead to rate cuts.
They said a discussion about rate cuts would become more likely if EUR/USD moved closer to 1.25. They also said the current geopolitical setting has increased focus on building a global role for the euro.
They said the French government is seeking an additional economic assessment of whether promoting euro use could lift EUR/USD and harm French exporters. ING’s baseline forecast puts EUR/USD at 1.22 at year-end, with upside risks.
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Looking back at the analysis from 2025, the perspective that the European Central Bank would tolerate a stronger euro has proven correct as we see EUR/USD holding firm. The forecast of hitting 1.22 by the end of last year was met, and the pair has continued to hover in the 1.22-1.23 range since the new year began. This stability confirms a fundamental shift in the ECB’s priorities toward enhancing the euro’s global role.
This structural support is becoming more visible in the data. Recent SWIFT figures for January 2026 showed the euro’s share of global payments climbed to a new three-year high, while a recent survey of central bank reserve managers indicated a continued, modest reallocation towards euro-denominated assets in the fourth quarter of 2025. This shows that the demand for the currency is not just speculative but is backed by institutional flows.
ECB policymakers have done little to discourage this trend, even as Eurozone inflation remains below the 2% target, coming in at 1.8% for January. We have seen no major official comments expressing concern about the exchange rate, reinforcing the view that the conversation only gets serious near the 1.25 mark. This effective green light from the central bank suggests the path of least resistance for the pair remains upwards.
For derivative traders, this environment makes buying medium-term EUR/USD call options with strike prices around 1.24 an attractive strategy. This positions for a potential breakout towards that 1.25 level in the coming months while capping downside risk. The relatively low implied volatility, as markets have grown accustomed to the ECB’s quiet tolerance, may offer good value on these options.
Alternatively, selling out-of-the-money put spreads with a lower strike around 1.21 could be considered. This strategy profits from both a slow grind higher and range-bound trading, collecting premium with the view that the ECB’s new policy stance provides a solid floor for the currency. We still hear occasional concerns from export-heavy nations, but these have not been enough to derail the underlying trend.
