The EUR/USD pair remained steady around 1.1635 during early Asian trading hours on Thursday, as market participants awaited the European Central Bank (ECB) policy meeting and the release of the US August Producer Price Index (PPI) later in the day [1]. The ECB is widely expected to raise interest rates by 25 basis points to 2.5%, marking the second hike this year, in response to surging energy prices and a rebound in Eurozone inflation above 3% in August [1]. According to Alessia Berardi, head of global macroeconomics at the Amundi Investment Institute, 'A September hike looks all but locked in,' with inflation anticipated to remain elevated and only ease in the second half of next year [1].
Strategists at Scotiabank noted that the Euro was unchanged versus the US Dollar entering Wednesday’s North American session after reaching a one-week high overnight. They highlighted that fundamentals remain supportive for the Euro, as ECB rate expectations have firmed due to the recent rally in oil prices, reflecting the ECB’s heightened sensitivity to energy price risks [1]. Scotiabank further indicated that another 25 basis point hike has been priced in for December, and they anticipate a 'hawkish hike' at Thursday’s meeting, with President Lagarde expected to signal ongoing concern about upside risks and reinforce a tightening bias [1].
On the technical front, EUR/USD maintains a mildly bullish near-term bias, trading above the 20-day and 100-day simple moving averages, with the Relative Strength Index (14) at 58, suggesting steady but not extreme upside momentum [1]. Immediate resistance is seen at the Bollinger upper band near 1.1700, a level where previous rallies have stalled [1].
Meanwhile, traders are also closely watching the US PPI data, with headline PPI expected to rise 5.3% year-over-year in August, up from 4.7% previously, and core PPI projected at 4.6% versus 4.2% in July [1]. Any signs of hotter-than-expected US inflation could strengthen the US Dollar and pose a headwind for the EUR/USD pair in the near term [1].
CONCLUSION
The Euro is holding steady above 1.1600 as markets anticipate a widely expected ECB rate hike and monitor US inflation data for further direction. While fundamentals and technicals support a mildly bullish outlook for the Euro, upcoming central bank decisions and inflation releases remain key drivers for the currency pair in the near term.