Investing in EURUSD as eurozone inflation heats up

The European Central Bank (ECB) is currently stuck between a rock and a hard place. A crippling energy shock and relentless geopolitical instability are forcing the regulator to keep its hawkish stance firmly in place—no rate cuts in sight. Right now, fuel accounts for roughly 40% of inflationary pressure in the eurozone, which is a staggering share. Such a massive weight on the scale pushes the central bank to maintain high borrowing costs and prevent "spillovers", where wage increases follow price hikes and the destructive cycle starts over again.

As a result, the market has ripped up the old playbook. Remember when everyone expected interest rates to drop below 2% in early 2025? Forget it. That story is over. Investors have flipped the script, now pricing in tighter policy instead of monetary easing. The new buzzword is "plateau"—and if energy prices don't cooperate by year-end, a rate hike scenario isn't off the table. Traders are currently betting on at least two 25-basis-point increases.

All this hawkish chatter is giving the euro a tailwind, pushing the EURUSD pair up to 1.1790. But here's the kicker: the Federal Reserve (Fed) is singing a completely different tune. The US central bank has already been mulling a rate cut in 2026. Meanwhile, its European counterpart is locked in tightening mode. This policy divergence is a gift for euro bulls, paving the way for further upside in the near term. 

The ultimate recommendation is to buy EURUSD. Lock in profits at 1.1790. Place Stop Loss at 1.1575.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.