EUR/USD Rallies on Hawkish ECB Stance Ahead of Jackson Hole

The EUR/USD pair strengthened to around 1.1655 during the early Asian session on Thursday, supported by a hawkish stance from the European Central Bank (ECB).

Ahead of the Jackson Hole Symposium event later this week, markets are pricing in nearly a 25% chance of the ECB's deposit rate reaching 3.0% by March 2027 and about a 60% chance by September.

ECB Executive Board member Isabel Schnabel said on Wednesday that borrowing costs will need to rise further due to the lengthy conflict in the Middle East and surprisingly strong euro-zone economy posing upside risks to inflation.

The Fed's preferred inflation gauge, the core Personal Consumption Expenditures (PCE) Price Index inflation held steady at 3.3% YoY in July, while the headline PCE Price Index remained unchanged at 3.7% YoY above the consensus of 3.6%.