Euro Faces Inflation Test as ECB Rate Hike Odds Waver

The euro's near-term trajectory is heavily influenced by upcoming inflation data, which will test market expectations for further European Central Bank (ECB) rate hikes.

BNY Mellon strategists note that the market's pricing of additional rate hikes is sensitive to inflation surprises. A stronger-than-expected print could reinforce those bets, providing support for the euro.

The recent rangebound trading in the euro reflects uncertainty about the ECB's next move. The inflation data will likely provide clearer direction and influence the currency's path.