Insights 
VT 
EUR/USD may see an upward trend in December after sustaining the 1.15 support level in November. The euro is expected to gain strength as ECB President Christine Lagarde may affirm that the current rates are fitting, supported by a robust Eurozone economy and stable conditions in France, according to DBS’ Senior FX Strategist.
The European Central Bank is anticipated to keep the deposit facility rate at 2% until 2026. During an appearance before the European Parliament on December 3, Lagarde is expected to express that interest rates are appropriate, citing optimism for the Eurozone economy moving forward and the prevailing stability in France.
Immediate Trading Focus
We see potential for EUR/USD to climb higher in December after it successfully held the 1.15 support level all through November. All eyes will be on ECB President Lagarde’s comments this week, on December 3, for confirmation of this direction. This sets the stage for our immediate trading focus.
The case is strengthening for the European Central Bank to keep its deposit rate at 2% for the foreseeable future, potentially through 2026. Recent data supports this, with Eurostat’s flash estimate for November showing headline inflation holding at a manageable 2.3%. The Eurozone economy’s resilience, marked by a 0.2% GDP growth in the third quarter, gives the ECB little reason to change course.
This policy stability in Europe contrasts with the situation in the United States, where the Fed may feel more pressure to act. For instance, the latest US jobs report for November showed a slight cooling, with non-farm payrolls adding just 150,000 jobs, below market expectations. This difference in economic momentum is a key driver for our bullish euro view.
Opportunity for Derivative Traders
For derivative traders, this outlook suggests that buying call options or setting up bull call spreads on EUR/USD could be a viable strategy to position for a move higher. One-month implied volatility for the pair has edged up to around 7.5%, indicating the market is pricing in more movement but is not yet in a state of panic. This presents an opportunity to enter positions before a potential breakout.
We have seen a similar pattern play out before, which gives us confidence in this view. Looking back to late 2023, the euro strengthened when the ECB maintained a firm stance while expectations for Fed rate cuts were beginning to build. This historical precedent supports the idea that policy divergence can provide a sustained tailwind for the single currency.
