The euro weakened broadly on Friday after ECB Governing Council members suggested the central bank could maintain its current policy stance well into 2026, contrasting sharply with expectations for other major central banks. Market participants interpreted the comments as a dovish pivot, sending the single currency lower against both the dollar and commodity-sensitive counterparts.
Traders noted that the ECB's cautious tone stems from persistent disinflationary pressures across the eurozone's core economies and stagnating manufacturing output in Germany. "The market is pricing in a higher probability of ECB policy divergence," said senior currency strategist at a major European bank. Meanwhile, the Australian and Canadian dollars gained ground as crude oil prices stabilized and iron ore demand from China showed resilience following Beijing's latest infrastructure stimulus package.
Technical analysts observed that EUR/USD is testing key support zones established in early November, with momentum indicators showing bearish alignment. The currency pair's decline accelerated after breaking through what traders described as a critical psychological threshold earlier this week. In contrast, AUD/USD and USD/CAD reflected growing appetite for risk-sensitive assets, with positioning data indicating hedge funds have increased long exposure to commodity currencies heading into year-end.
Looking ahead, market focus shifts to next week's ECB meeting minutes and the final Federal Reserve decision of 2025. Currency traders are also monitoring upcoming Chinese economic data for further cues on commodity demand. The divergence theme appears likely to dominate positioning strategies through the holiday period, with many investors reluctant to take aggressive euro long positions before clarity emerges on the ECB's 2026 policy roadmap.
Disclaimer: This analysis is AI-generated for educational purposes. Traders should verify all information and conduct their own research before making trading decisions.