EUR/USD gains ground above 1.1800 ahead of Eurozone HICP release

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EUR/USD gathers strength to around 1.1830 in Wednesday’s early European session.
Resolution of partial government shutdown and shifting expectations for Fed policy might support US Dollar and cap the pair’s upside.
ECB is anticipated to hold rates steady at the first meeting of the year.

The EUR/USD pair trades on a firmer note near 1.1830 during the early European session on Wednesday. Nonetheless, the upside for the major pair might be limited as traders remain cautious after a partial government shutdown swiftly ended. Later on Wednesday, the preliminary reading of the Harmonized Index of Consumer Prices (HICP) from the Eurozone will be closely watched.

The BBC reported that US President Donald Trump signed a bill to end a partial government shutdown that began on Saturday. The deal passed the US House of Representatives in a 217-214 vote earlier on Tuesday. This headline, along with Kevin Warsh's nomination by Trump as the next Federal Reserve (Fed) chief, could provide some support to the US Dollar (USD) as it eases some of the concerns over the US fiscal situation and the Fed's independence.

All eyes will be on the European Central Bank (ECB) interest rate decision on Thursday. The ECB is widely expected to keep its key interest rates unchanged at its February monetary policy meeting, marking the fifth consecutive meeting with no change. Traders will closely monitor the ECB press conference for more clues about interest rate outlook. Any hawkish remarks from ECB President Christine Lagarde could underpin the shared currency against the Greenback in the near term.

“Lagarde is likely to reiterate that the euro-area economy remains in a good place, but risks remain elevated,” said Swedbank economist Nerijus Maciulis. “The first weeks of 2026 have clearly illustrated that trade deals and agreements remain very fragile.”

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.