A rate hike is almost fully priced in, so the market is now focused on what Christine Lagarde says about the next steps.
EUR/USD is trading around 1.1635–1.1640 on Thursday.
3 Takeaways
- The ECB is widely expected to raise its deposit rate by 25 basis points to 2.50% today.
- Brent above $100 is adding to inflation risks and complicating the central bank’s policy outlook.
- US PPI is due today, followed by CPI tomorrow, while markets still see roughly a 60% chance of a Fed rate hike next week.
Current movement
EUR/USD remains above 1.16 ahead of the ECB decision, while the dollar is receiving limited support even from higher US Treasury yields. The 10-year Treasury yield has climbed toward 4.84%, its highest level since 2023, but the US Dollar Index remains under pressure. Investors are simultaneously assessing the energy shock, the outlook for interest rates and developments in the US Treasury market.
Main macro driver
Oil has become the main source of uncertainty for the pair. Brent has moved above $100 per barrel following the largest wave of attacks on shipping around the Strait of Hormuz since the conflict began. For the eurozone, higher energy prices mean additional inflation pressure but also weaker prospects for industrial activity and consumption. The energy shock therefore strengthens the case for a more hawkish ECB without necessarily becoming a clear positive for the euro itself.
Central banks
The ECB rate increase itself is almost fully priced in, so the EUR/USD reaction is likely to depend more on Christine Lagarde’s press conference. Markets want to know whether policymakers see today’s move as insurance against energy-driven inflation or as the beginning of a longer tightening cycle. Core eurozone inflation remains relatively moderate at 2.4%, meaning an aggressively hawkish signal from the ECB is not guaranteed.
Technical picture
EUR/USD continues to hold the 1.1600 area as its main short-term support. As long as the pair remains above this level, there is room for a move toward 1.1675–1.1700. A firm break above 1.1700 would improve the medium-term technical picture, while a return below 1.1600 would bring 1.1550 back into focus.
FAQ
What matters most for EUR/USD today?
The key factor is not the ECB rate hike itself, but Lagarde’s guidance on whether further policy tightening remains possible.
What could support the euro?
A signal that the ECB is prepared to continue raising rates if energy-driven inflation remains elevated.
What could strengthen the dollar?
Stronger-than-expected US PPI today and CPI tomorrow, particularly if they increase expectations for a September Fed rate hike.
