Euro: Yield support into ECB decision – MUFG
MUFG’s Lee Hardman highlights that EUR/USD has been gradually moving higher, supported by more energy-sensitive European yields and expectations of a hawkish ECB.
Euro has seen a gradual increase in the EUR/USD exchange rate, driven by energy-sensitive European yields and expectations of a hawkish decision from the European Central Bank (ECB). The pair has recently moved above its 200-day moving average near 1.1635, and markets are almost fully priced for another rate hike by December. This has set the bar for a hawkish surprise from the ECB.
Market attention is now focused on the ECB's policy update, which is expected to provide justification for a second hike in the current tightening cycle. The Euroland rate market is anticipating that the ECB will be more cautious about moving rates into restrictive territory, but the recent unfavorable energy price developments will intensify policymakers' concerns over potential second round inflation effects.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
