Euro Holds Ground as ECB Hikes Still Expected

The Euro has been trading heavily near 1.1600 due to recent economic data from the Eurozone, specifically the August Consumer Price Index (CPI). The CPI showed a slight easing of underlying inflation pressures, but core and services measures slowed down.

Despite this, the European Central Bank (ECB) still has room to hike interest rates, given that Eurozone inflation remains above target and growth outlook is firm. Markets have nearly fully priced in a 25 bps rate hike to 2.50% on September 10 and a total of 75bps of tightening over the next twelve months.

Elias Haddad from Brown Brothers Harriman (BBH) comments that this ECB path supports the Euro's downside floor, making fresh lows below 1.1400 unlikely.