EUR/USD Pressured by Rate Expectations as Dollar Remains Strong

The EUR/USD pair remains under pressure as rate expectations weigh on the euro's upside. As of August 28, it is trading around 1.1645, having failed to break above the 1.1670-1.1680 level.

Today's European data provided some support for the euro, with the European Commission's Economic Sentiment Indicator rising to 98.4 in August from 97.1, a high since January. Germany's Ifo index also increased to 88.8 from 86.7.

However, despite these positive indicators, Germany's labor market remains weak, but without further deterioration. The number of unemployed rose by only 4,000 versus expectations for an increase of 5,000, while the unemployment rate remained at 6.4%.

The European Central Bank's (ECB) outlook is now crucial for the euro. Resilient business sentiment combined with persistent inflation pressure suggests that a high probability of another ECB rate hike in September is being priced in by the market.