ECB Hike Decision Tied to Volatile Oil Prices

The recent price fluctuations in Brent have had a significant impact on the European Central Bank's (ECB) decision-making process regarding interest rate hikes. In July, Brent peaked at $96.12, but it has since fallen to $87.86 by August 7th and then rebounded slightly to $88.52 on the 14th.

The ECB's September meeting is heavily influenced by these energy price trends, making it difficult for economists to project their decisions with certainty. Despite this uncertainty, a Reuters poll of 57 out of 69 economists shows that 83% expect the ECB to raise interest rates again on September 10th, similar to the 65% who expected it in June.

Leveraged funds have shifted from being net long to net short over the same period, while slow money has been selling for most of the year. The recent increase in euro area inflation to 2.9% in July, primarily driven by energy prices, turns EUR/USD into a levered bet on one commodity.