Euro weakens despite ECB rate hike as US PPI comes in hot
EUR/USD extends its intraday decline on Thursday as a recovery in the US Dollar (USD) weighs on the Euro (EUR), while the European Central Bank’s (ECB) widely expected rate hike fails to offer support.
The Euro weakened despite a rate hike from the European Central Bank (ECB) as the US Dollar (USD) strengthened. The USD rallied after hotter-than-expected US Producer Price Index (PPI) data came in, indicating rising inflation. The EUR/USD pair fell to around 1.1604, down 0.25% for the day. The ECB increased its key interest rates by 25 basis points, bringing the deposit facility rate to 2.50%.
ECB officials cited the Middle East conflict as a key driver of inflation, stating that it would remain above target for an extended period. They also warned that inflation risks were tilted to the upside while economic growth risks were tilted to the downside. Interestingly, the US Dollar Index (DXY) held steady around 99.10, buoyed by higher US Treasury yields.
Traders priced in a 64% chance of a 25-basis-point Federal Reserve (Fed) rate hike at the upcoming September meeting, while closely watching Friday's US Consumer Price Index (CPI) report.
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Also reported by 2 other outlets
- Euro gains modestly against British Pound after ECB delivers widely expected hike fxstreet.com
- Nervy markets await ECB rate hike, US inflation data freemalaysiatoday.com
