EUR/USD at Risk as ECB Hike Looms and Energy Costs Rise

The European Central Bank (ECB) is expected to raise its deposit facility rate by 25 basis points to 2.5% on Thursday, and investors are watching for signs of a more hawkish tone in the bank's economic outlook.

While the decision itself is largely priced-in, traders will be closely monitoring the ECB's inflation projections and guidance, particularly whether rising energy costs are seen as temporary or a sign of persistently higher inflation.

The euro has been rallying against the US dollar, but technical analysis suggests that it may be vulnerable to a pullback in the near term. Futures positioning still supports the broader bullish trend for the euro, however.