ECB Rate Hike Expectations Boost EUR/USD

According to Brown Brothers Harriman's (BBH) economist Elias Haddad, the Eurozone August headline Consumer Price Index (CPI) is expected to accelerate to 3.3% year-on-year due to higher energy prices.

This would be a significant increase from July's 2.9%, and core inflation is forecast to remain steady at 2.5% for a second consecutive month.

Haddad believes that above-target inflation and a firmer growth outlook give the European Central Bank (ECB) room to move interest rates toward the upper end of its neutral range, estimated between 1.75% and 3.00%

The swaps curve has already priced in a 25bps ECB rate hike to 2.50% on September 10, with a total of 60bps of tightening expected over the next twelve months.