Traders anticipate a 25 basis point ECB rate increase on Thursday, the first in nearly three years, lifting the Euro against the USD.
The EUR/USD pair rose to 1.1545 in early European trading Tuesday, driven by expectations of a European Central Bank rate hike. The ECB is poised to raise its key interest rate by 25 basis points at its June 11 meeting, marking its first increase in nearly three years.
Markets are pricing in the move following recent hawkish ECB communications, with analysts citing inflation pressures from energy costs tied to Middle East tensions. The US Consumer Price Index data on Wednesday may influence the pair further ahead of the ECB decision.
ECB President Christine Lagarde’s press conference on Thursday could provide additional support for the Euro if policymakers signal further tightening. Geopolitical uncertainty in the Middle East remains a wildcard for currency markets.