EUR: Range-Bound Trading Outlook - Rabobank

EUR/USD is currently trading near 1.1641, with the market weighing the outlook for policy divergence between the US and Europe. Jane Foley, senior FX strategist at Rabobank, believes that while the dollar may come under pressure when risk appetite recovers, fundamental differences between the US and Europe make it difficult for the euro to achieve a trend-breaking move, with the pair more likely to remain range-bound.

**US-Europe Policy Divergence Constrains Direction** The ongoing divergence in inflation paths and monetary policy expectations between the US and the eurozone remains the core factor holding back EUR/USD. According to Rabobank's view, rising Fed rate-cut speculation once pushed the euro to the top of its yearly trading range, but the eurozone's own economic and political uncertainties have limited further upside momentum. Strategist Foley emphasized that eurozone-specific factors will complicate the outlook, making one-directional bets relatively risky.

**Internal Euro Risks Persist** The political situation in the eurozone remains a potential source of volatility. Rabobank has previously warned that the euro remains highly fragile, and related uncertainties could bring further shocks to the market. Although external factors such as a dollar pullback provide intermittent support, the lack of endogenous positives makes it difficult for the euro to break free from its range constraints. Overall, the institution expects the pair to continue its tug-of-war within the existing trading framework until clear breakout signals emerge on the policy or political front.