Euro Rises as ECB Hike Bets Keep EUR/USD Above 1.1650

Key Moments

ECB Hawkish Tilt Keeps Euro Supported

EUR/USD posted moderate gains around 1.1655 during Thursday’s early Asian session, as the Euro found support from expectations of further policy tightening by the European Central Bank (ECB). Market participants were positioning for a more hawkish ECB outlook while awaiting potential catalysts from the Jackson Hole Symposium later on Friday.

Investors anticipated that the ECB would deliver another interest rate increase in September, following a tightening move in June aimed at curbing price pressures amid ongoing geopolitical strains. According to Reuters, markets were pricing close to a 25% probability that the ECB deposit rate would reach 3.0% by March 2027 and roughly a 60% chance of that level being reached by September.

On Wednesday, ECB Executive Board member Isabel Schnabel stated that borrowing costs would need to rise further, citing upside risks to inflation from the prolonged conflict in the Middle East and the stronger-than-expected performance of the euro-area economy.

US Inflation Data In Line with Fed Expectations

On the US side, the latest reading of the Federal Reserve’s preferred inflation gauge aligned with expectations. The US Bureau of Economic Analysis (BEA) reported on Wednesday that core Personal Consumption Expenditures (PCE) Price Index inflation remained at 3.3% year-over-year in July.

Headline PCE Price Index inflation held at 3.7% year-over-year in July, above the consensus estimate of 3.6%. On a month-over-month basis, both the PCE Price Index and core PCE Price Index rose by 0.2% in July.

Traders were looking to guidance from Federal Reserve officials speaking at the annual Jackson Hole symposium in Wyoming for additional direction on US monetary policy. Fed Chairman Kevin Warsh’s remarks were expected to be a key focus for markets.

Market-Implied ECB Path Remains Firmly Hawkish

Strategists at Scotiabank noted that expectations for ECB policy remained strongly tilted toward additional tightening. They pointed out that markets were still “pricing 24 basis points of tightening for the September 10th meeting and a cumulative 40 basis points by year end.” According to the strategists, this persistent hawkish profile continued to underpin sentiment toward the Euro, even as the recent rally showed signs of pausing.

Technical Picture: EUR/USD Holds Bullish Bias Above Key Moving Averages

From a technical standpoint, EUR/USD extended its recovery on the daily chart, trading above both the 100-day simple moving average (SMA) and the 20-period SMA of the Bollinger Bands. These levels were providing a constructive backdrop for a bullish outlook.

The pair was trading in the upper half of the Bollinger Band range, with the upper band acting as immediate overhead supply. The 14-period Relative Strength Index (RSI) stood at 65.8, leaning toward overbought conditions and suggesting that upside momentum remained firm but increasingly stretched.

On the downside, initial support was clustered near the 20-period SMA at 1.1585, backed by the 100-day SMA at 1.1575 just below. If a broader corrective move developed, the lower Bollinger Band at 1.1462 would come into view as a deeper demand zone.

On the upside, the upper Bollinger Band around 1.1715 represented the first notable resistance. A decisive move above this level would signal scope for the current bullish phase to extend further, while a failure to break higher could prompt a consolidation phase back toward the moving average supports.