Investors await the ECB’s 25-basis-point hike but focus on forward guidance, with dovish signals risking further Euro declines.
The Euro (EUR) hovers near 1.1550 against the US Dollar (USD), close to two-month lows, as markets brace for the European Central Bank’s (ECB) rate decision. A 25-basis-point hike is widely expected, but traders will scrutinize the ECB’s forward guidance for clues on future tightening.
The ECB’s last rate adjustment in June saw a 50-basis-point increase, but inflation concerns persist. With US inflation hitting 4.2% year-over-year in May, Fed rate hike expectations are rising, adding pressure on the EUR/USD pair.
Geopolitical tensions, including US strikes on Iran and threats of further action, are dampening risk appetite. The Strait of Hormuz closure announcement and IRGC vessel targeting add to market caution, potentially limiting the Euro’s upside even if the ECB delivers the expected hike.