Euro Held Back, Markets Await ECB Decision
Newsmaker.id - The euro traded within a limited range against the US dollar on Friday, July 17, 2026. The EUR/USD pair hovered around 1.1440 after moving within a narrow range, as investors lacked a strong enough new catalyst to determine its next direction.
The US dollar continued to receive support from escalating tensions between the United States and Iran, which boosted demand for safe-haven assets. However, the greenback's gains were restrained after lower US inflation data led markets to reduce speculation of an imminent Federal Reserve interest rate hike. The probability of a Fed rate hike in July fell to around 11% from 25% the previous week.
In Europe, investors' attention is turning to the European Central Bank meeting on July 23. The ECB is expected to maintain its deposit rate at 2.25% after raising it in June, but surging oil prices have raised the possibility of further tightening in September to curb inflation risks.
The euro's direction is also overshadowed by concerns that rising energy prices could depress eurozone economic growth. Inflation in the region slowed to 2.8% in June, but remained above the ECB's 2% target. This condition has led to EUR/USD consolidation while the market weighs the risks of inflation, economic growth, and the policy direction of the ECB and the Fed.
Market Impact
The limited movement of EUR/USD indicates that investors are still awaiting certainty regarding the direction of central bank policy. If the ECB signals further interest rate hikes while speculation about a Fed rate hike continues to diminish, the euro has the potential to strengthen again.
Conversely, a worsening US-Iran conflict and rising oil prices could put pressure on the euro, as the eurozone is a major energy importer. A strengthening dollar as a safe-haven asset could also push EUR/USD back towards the 1.1400 area, while a rise above the 1.1470 range could open the door to broader gains. (CP)
