Options traders anticipate fresh momentum for the euro next week as the European Central Bank's upcoming rate decision is expected to highlight its policy divergence with the Federal Reserve. DTCC data shows the most actively traded strike price this month is €1.18/USD, with the bulk of open interest concentrated in contracts expiring December 18-19 - coinciding with the ECB's policy window. These flows suggest markets expect the euro to trade above this level post-meeting.

The euro hovers near two-month highs following the Fed's third consecutive rate cut this week and hawkish remarks from ECB Executive Board member Isabel Schnabel. Current options sentiment for the December 18 ECB decision is the most bullish in three months, with pre-meeting volatility pricing at its most expensive since September - a move traders attribute to Schnabel's comments.

Morgan Stanley strategists maintain their €1.30/USD target for Q2 2026, even if the ECB refrains from rate hikes next year. Market sources indicate hedge funds drove this week's bullish euro moves, accumulating both vanilla and exotic options positioned to profit from euro strength.