MUFG warns Euro support may weaken despite a likely ECB rate hike in September, citing energy costs and stronger US economic data.
The European Central Bank’s latest signals point to a probable rate increase in September, now nearly fully priced by markets. Analysts highlight growing downside risks for the Euro as energy prices climb and European economic data softens, contrasting with US resilience.
EUR/USD recently broke below 1.1400, reflecting concerns over inflation persistence and weaker growth in the Eurozone. While the ECB acknowledged stable energy prices, it cautioned that the full inflationary impact of the energy shock remains unresolved, reinforcing expectations for further tightening.
Market reaction has favored the US Dollar, with broader gains seen amid diverging economic outlooks. Analysts suggest the Euro and British Pound face heightened downside risks if energy markets continue their upward trend.