EUR/USD Surges Above 1.15 as Japan and US Intervene
The EUR/USD exchange rate surged above 1.15, fueled by Japan's intervention in the foreign exchange market. This move was not a one-off, as South Korea also intervened on Thursday, and US Treasury participation was confirmed for the first time since 2011.
Experts believe that with USD/JPY trading at levels seen in April and May, there is a low probability of another intervention soon, allowing the greenback to return to fundamentals. The fundamental outlook remains unchanged, awaiting key data releases and US-Iran developments.
A de-escalation in tensions would keep the dollar under pressure due to easing inflationary worries and lower rate hike probabilities. An escalation, on the other hand, should continue to support the greenback on Fed tightening risks. A hot Consumer Price Index (CPI) reading could seal a rate hike at the September meeting.
The European Central Bank (ECB) left interest rates unchanged in its last meeting but signaled readiness to hike if the inflation outlook deteriorates. Market pricing favors a 72% chance of an increase in September, with core inflation ticking higher to 2.5% in the Eurozone Flash CPI report.