Euro Fails to Benefit from Expected Rate Hike Amid Elevated Inflation Pressures

The European Central Bank (ECB) raised its three key interest rates by 25 basis points, marking its second hike this year. However, the move failed to provide support for the Euro, which extended its intraday decline against the US Dollar.

Meanwhile, the US Producer Price Index (PPI) data showed hotter-than-expected annual headline inflation, with a 5.4% increase in August.

The PPI figures suggest that inflation pressures remain elevated, strengthening the case for a Federal Reserve rate hike next week. The CME FedWatch Tool indicates that traders price in around a 64% probability of a 25-basis-point increase at the September 15-16 meeting.