EUR/USD Rises as Markets Anticipate ECB Tightening
Newsmaker.id - The euro strengthened against the US dollar on Friday (July 10th), with the EUR/USD pair holding above the 1.1400 level. This strengthening was supported by growing market expectations that the European Central Bank (ECB) would continue to raise interest rates to curb inflationary pressures.
Bet on an ECB interest rate hike intensified after the minutes of its June meeting showed that officials expected eurozone inflation to remain above its 2% target through the first half of 2027. This projection even included nearly three rate hikes of 25 basis points each.
Energy price pressures due to the conflict in the Middle East were a major factor driving the shift in policy expectations. Rising oil prices are feared to increase production and transportation costs, while also prolonging inflationary pressures in the eurozone.
The ECB had previously raised its benchmark interest rate at its June meeting, bringing the deposit rate to 2.25%. Market participants estimate there is still a chance of two additional rate hikes in the coming year, although the central bank has not yet committed to a specific policy direction.
The euro's strengthening is also supported by a limited weakening of the US dollar. However, EUR/USD's gains are likely to remain restrained as the market is starting to factor in most expectations of an ECB rate hike, while investors await developments in the Middle East conflict and the latest policy signals from the Fed. (CP)
