ECB Expected to Raise Benchmark Rate Amid Stronger US Jobs Report

The European Central Bank (ECB) is expected to raise its benchmark rate for the second time this year on Thursday, according to Andrew Kenningham, chief Europe economist at Capital Economics. The deposit rate is set to increase from 2.25 percent to 2.5 percent.

Meanwhile, a stronger-than-expected US jobs report showed 162K job additions in August, pushing Federal Reserve (Fed) rate-hike bets above 60%. This has led to increased expectations of further tightening by the Fed, which could have implications for the Euro.

The ongoing Middle East tensions, including tit-for-tat strikes between the US and Iran on vessels sailing in the Strait of Hormuz, may also drive flows into safe-haven assets such as the Greenback. However, analysts at Deutsche Bank highlight that the ECB policy decision will be the key event, with their European economics team expecting a 25bp rate increase.