Europe’s net energy imports and rising oil prices continue to weigh on the EUR despite the ECB’s expected rate hike in September.
The European Central Bank held rates steady in July and signaled a likely 25 basis point hike to 2.50% in September. Markets had priced in the move, but the EUR remains pressured by unfavorable energy terms-of-trade dynamics against the USD.
Europe’s status as a net energy importer contrasts with the US’s position as a net exporter, leaving the EUR vulnerable to sustained oil price increases. Energy-linked currencies like NOK have outperformed, while net importers such as NZD and SEK lagged.
Despite the ECB’s hawkish bias, analysts expect the USD to retain its advantage as long as energy prices remain elevated.