ECB Rate Hike Could Lift Euro Amid Divergence with US Fed

The euro may see a modest increase later this year if the European Central Bank raises interest rates while the Federal Reserve keeps its rates unchanged, according to strategists at UniCredit's The Investment Institute.

In their baseline scenario, the ECB is expected to raise interest rates in September, whereas the Fed will remain on hold. This divergence between the two central banks could lead to a moderate euro-dollar rebound, they say.

The euro's potential gains are likely to be capped at $1.17, according to the strategists.