Where the market stands
The euro traded at $1.1134, down 0.2% as of 8:54 a.m. in London, with investors bracing for the ECB later Thursday. Technical momentum still looks heavy, leaving room for a new 17-month low if selling accelerates.
Worries tied to France appear baked into longer-term positioning. Pricing in longer-expiry options shows sentiment on the euro is the bleakest since March 2025, and, amid regional fiscal and political strains, the currency is heading toward the steepest two-month drop since late 2024.
What traders are doing
Some short-dated bearish option structures have been unwound recently, according to FX traders who asked not to be named, yet interest to sell below $1.11 remains. One-week risk reversals have turned less negative in recent sessions, but one-year risk reversals show the premium for euro downside is still widening.
A fear-versus-greed gauge that compares buying to selling strength has stayed in bearish territory for its longest streak since January 2025. In cumulative terms, this downswing ranks as the third-largest bearish stretch of the past six years.
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The ECB, the Fed, and your portfolio
ECB policymakers are expected to hold rates steady while they assess how elevated energy costs and slower economic momentum feed through to inflation. At the same time, expectations for more Fed tightening are boosting the dollar's appeal versus the euro.
ING Groep NV currency strategist Francesco Pesole said the euro-dollar pair "has shown it's not yet ready to break below 1.11," adding, "We don't expect today's ECB risk event to trigger a major leg lower." In plain English: positioning is stretched, but a sharp break today is not the base case. For portfolios exposed to Europe or dollar earners, the mix of steady ECB, firmer dollar, and lingering France risk keeps FX moves a live factor to watch.
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