EUR/USD Gains Strength as ECB Hints at Rate Hike

The EUR/USD pair gained strength on Friday, rising to around 1.1385 in early European trading hours. This move was largely driven by expectations of imminent European Central Bank (ECB) rate hikes.

In its July policy meeting, the ECB decided to keep key interest rates unchanged but held the door open for another rate hike in September. This decision was made in response to a surge in energy prices that is threatening to keep inflation well above the 2% target.

ECB President Christine Lagarde stated that inflation is expected to remain 'well above target' until the first half of 2027, and officials are on high alert for a potential 'second-round inflation shock' triggered by the US-Iran conflict.