EUR/USD Holds Steady Ahead of ECB Rate Hike Decision

The Eurozone's economy has shown a boost in growth, with a revised second-quarter expansion of 0.6% exceeding expectations of 0.4%. The Sentix investor survey also jumped to 5.1 from 0.9, contributing to the pair's gain. EUR/USD held above 1.1600 after a session range of 28 pips, up 0.10%. All 65 economists in the Reuters poll expect an ECB hike on Thursday.

The European Central Bank (ECB) is set to raise interest rates this month, with futures pricing a third increase to 2.75%. However, surveyed economists do not anticipate this level of tightening. The curve and forecasting community hold opposing views on the only question Thursday's decision can answer: whether the ECB will move into mildly restrictive territory.

The bank's own research has argued against further rate hikes, citing that the energy shock has not fed into non-energy inflation as it did in 2022. This could lead to a rate gap that does not impact the currency. Headline inflation is currently at 3.3%, with new staff projections expected after Thursday's decision.