EUR/USD Breaks Downtrend as ECB Rate Bets Strengthen on Surprise GDP Growth and Inflation

The EUR/USD pair has broken its downtrend as ECB rate bets strengthen. The pair traded at 1.1501 on Friday, down 0.23% from the previous session but holding above the 1.15 handle and near its highest level since June 16.

However, going into Wednesday's Fed decision, EUR/USD was pinned near 1.1386 with the dollar sitting at a one-month high on safe-haven flows out of the Middle East conflict. Markets had assigned roughly a one-in-three chance to a surprise Fed hike. The committee held, three regional presidents dissented in favor of a hike, and on paper that reads hawkish.

The pair spiked into the upper 1.1470s Wednesday evening and traded 1.14578 by 01:17 GMT Thursday. Then the European data landed. Second-quarter eurozone GDP came in at 0.4% quarter over quarter against a 0.2% forecast. German inflation rose more sharply than expected.

The EUR/USD climbed aggressively through 1.1500, cleared the mid-July top, and printed a new higher swing high, the first genuine structural break in the downtrend since January. Friday capped it. Eurozone July flash HICP accelerated to 2.9% from 2.8%, core firmed to 2.5% from 2.4%, and the pair bounced off the 1.1536 to 1.1542 zone before easing back toward 1.1501.