The euro remains up 13.7% year-to-date, with near-term price action driven more by the US dollar and a general risk-on mood than by Eurozone data. But for the moment, thin holiday liquidity limits conviction. Some strategists note EURUSD is closely tracking patterns seen during Trump’s first presidency, suggesting upside targets for 2026 could be reached as early as Q1 if the analogy holds. Geopolitically, Ukraine’s push for long-term US-backed security guarantees is modestly supportive for the euro over the medium term, though recent setbacks in peace efforts and lingering war risk cap near-term optimism. Positioning data show elevated long euro exposure, but not yet at levels that typically signal an imminent reversal.

The yen edged slightly lower as markets remain focused on Japan’s very loose fiscal policy and cautious monetary outlook. While the BOJ is debating gradual rate hikes and sees room to tighten further, softer Tokyo inflation data has reinforced a slower pace of tightening, limiting yen support. Authorities have signaled readiness to intervene if USDJPY breaks above 158, a level that would significantly raise pressure for action. Although a combination of gradual BOJ tightening and eventual Fed easing could support yen appreciation, many banks still expect the currency to remain structurally weak for years due to wide yield gaps, negative real rates, and persistent capital outflows.

The Australian dollar edged higher as precious metals stabilized after a sharp sell-off earlier in the week. The Aussie remains one of the top three performing G10 currencies this quarter, despite recent volatility driven by profit-taking in silver and gold following higher margin requirements. We continue to view pullbacks as buying opportunities, with the currency supported by expectations that the RBA could begin tightening policy in early 2026, alongside resilient domestic economic data, strong commodity demand, improving global risk sentiment, and a broadly weaker US dollar—factors that together point to continued AUD strength into 2026.