Markets price in 95% odds of a 25-basis-point ECB rate increase in September after inflation concerns persist.
The EUR/USD pair rose to near 1.1385 in early European trading Friday, supported by expectations of further European Central Bank rate hikes. The ECB held rates steady at its July meeting but signaled a potential increase in September as inflation remains above its 2% target through 2027.
Preliminary July PMI data from the Eurozone, Germany, and the US will be released later Friday. Markets now assign a 95% probability to a 25-basis-point hike in September, with a similar chance of another move by December, reflecting persistent inflation risks tied to energy prices and geopolitical tensions.
ECB President Christine Lagarde warned of a potential “second-round inflation shock” amid escalating US-Iran conflict, reinforcing hawkish expectations. The Euro’s near-term outlook remains supported by these rate hike bets.