Euro Sells Off Hard Against USD as ECB Rate Hike Takes Hold
The European Central Bank's (ECB) decision to raise its deposit rate to 2.50% on September 10 has sent shockwaves through the market, causing the euro to sell off hard against the US dollar.
The move is a response to inflation rates above 3%, and every increase adds to what France pays on new debt. The ECB's bond-buying backstop is reserved for selling it judges unwarranted and disorderly, but a widening deficit may not be considered as such.
The euro area's flash Harmonised Index of Consumer Prices (HICP) for September is due on Friday at 09:00 GMT, forecast at 3.6% YoY from 3.2%, with the core rate forecast at 2.5% from 2.4%. ECB Executive Board member Cipollone speaks before the release and ECB Vice-President Vujčić after it.
A hot reading could raise the odds of an ECB hike on October 29, increasing the cost of that hike to France. The resistance level has been broken at 1.1300, a first since May 2025, and support sits just under Thursday's low at 1.1200.