European yields hold firm while US Treasury yields stabilize, lifting the euro after a sharp intraday drop in US rates.
EUR/USD rose toward 1.1600 as US Treasury yields steadied following a pullback from yesterday’s peak of 4.75% to 4.69%. European yields remained elevated, supporting the currency pair amid shifting market expectations for ECB policy.
The German ZEW economic sentiment index improved in August, with expectations at 34.2, above the 30.0 consensus, while the current situation gauge rose to -61.1. Euro area growth is also benefiting from fiscal stimulus, though inflation data due later may confirm a 2.9% annual rate.
Danske Bank analysts argue markets are overpricing ECB rate hikes, suggesting potential downside for European rates. The upcoming FOMC minutes are seen as the next key catalyst for direction.