Euro Falters Against USD Amid Energy Price Pressures

The European Central Bank (ECB) maintained its hawkish stance in July by keeping interest rates unchanged, as expected. However, despite this, the Euro remains disadvantaged against the US Dollar due to rising energy prices and Europe's status as a net energy importer.

Rising energy prices still favor the US Dollar over the Euro in terms of trade, according to OCBC's Sim Moh Siong and Christopher Wong. They note that the ECB is expected to deliver at least one more 25 bp hike to 2.50% in September.

The US, on the other hand, is a net energy exporter, making it less vulnerable to sustained increases in oil prices. This dynamic has led to terms-of-trade favoring the USD over the EUR.