Euro Surges on Strong Inflation Data and Hawkish ECB Pricing
The Euro has seen significant gains against the US Dollar, driven by strong inflation data and firmer expectations for European Central Bank (ECB) rate hikes. According to Scotiabank's Shaun Osborne and Eric Theoret, the euro area's July Producer Price Index (PPI) rose to 5.8% year-over-year, its highest level since May.
The ECB remains committed to addressing intensifying inflation risks, with markets now pricing in more than one 25 basis point hike by the end of the year. This hawkish pricing has led to renewed support for the Euro, with yield spreads offering a boost to the currency.
Short-term technicals are neutral to bullish, with clear support below 1.16 and specifically at 1.1580. The EUR/USD pair has seen a modest lift in momentum, pulling the Relative Strength Index (RSI) back into the mid-50s and shifting the balance of risk to near-term strength.
Limited resistance is expected ahead of 1.1650, with Scotiabank estimating fair value for the EUR/USD pair at around 1.1623.