EUR/USD edged up to about 1.1540 in early Asian trade on Friday. Volumes may be low because of the Good Friday holiday, while the US March Nonfarm Payrolls report is due later.
Comments from the European Central Bank may support the euro in the near term. Policymaker Francois Villeroy de Galhau said on Thursday that the next rate move will very likely be an increase, but it is too early to say when hikes will begin.
Market Expectations For Ecb Policy
Markets are pricing in nearly an 81.0% chance of a 25 basis point rise at the April 30 ECB meeting, according to the ECB Watch Tool. That pricing follows recent guidance on the likely direction of rates.
Fighting in the Middle East is in its second month, which could lift oil prices and support the US Dollar as a safe-haven. US President Donald Trump referred on Thursday to the destruction of a bridge in Tehran and warned that “much more” would follow, urging Iran to “make a deal”.
Iran’s foreign minister, Abbas Araghchi, said recent US strikes on civilian infrastructure would not force Iran to back down. He also said the actions “convey the defeat and moral collapse of an enemy in disarray.”
It feels familiar looking back to April 2025 when we were anticipating European Central Bank rate hikes. Fast forward to today, the central bank has paused its hiking cycle, and with recent inflation data for the Eurozone coming in at 2.1%, the debate has shifted towards the timing of potential cuts. This contrasts sharply with the hawkish buildup we saw last year.
Key Drivers Ahead Of Nfp
The geopolitical tensions we saw flaring up in the Middle East in 2025 continue to simmer, keeping Brent crude oil prices elevated around $95 a barrel. This situation provides underlying support for the US dollar as a safe-haven asset. All eyes are now on today’s US Nonfarm Payrolls report, which is expected to show a cooling labor market with a consensus forecast of 180,000 new jobs.
Given the divergence between a potentially dovish ECB and a data-dependent Fed, we expect volatility in EUR/USD to pick up. Looking at historical data from similar periods of policy uncertainty in 2023 and 2024, sharp moves often followed major data releases. Therefore, buying options strategies like straddles or strangles on EUR/USD could be a prudent way to position for a significant price swing after the jobs report, regardless of the direction.
The interest rate differential, which widened throughout 2025, continues to favor holding US dollars over Euros. If today’s NFP data comes in stronger than expected, it would reinforce the dollar’s yield advantage and push back against the narrative of an economic slowdown. Consequently, traders might consider purchasing out-of-the-money EUR/USD put options as a cost-effective way to speculate on a downward move in the coming weeks.
