(adds link for stretched situation)

• No inflation is anticipated that may influence EUR/USD

• US and EZ 5 year-5 year inflation swaps barely changed in 2026

• No meaningful divergence in interest rates is anticipated

• One year EUR/USD forward swap was 170 pts in Dec 2025, 166 now

• Measures of both US and eurozone inflation are slightly elevated

• EUR/USD has sunk from 1.2084 to 1.1265 in 2026

• Traders have sold short and the drop is becoming stretched

• US and eurozone 5 year-5year inflation swaps, one year
forward swap and EUR/USD

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)