Euro Soars Against Weak Dollar Ahead of ECB Rate Decision
The Euro has surged against the US Dollar as the Greenback experiences broad weakness. This is largely due to a sharp rally in the Japanese Yen, which has pushed USD/JPY near levels last seen in February and resulted in a 4% decline so far this month.
The EUR/USD pair trades around 1.1647, up 0.20% on the day, while the US Dollar Index (DXY) hovers at 98.65, its lowest level since August 21.
Despite the Euro's gains, traders remain cautious ahead of key risk events this week, including the European Central Bank's (ECB) monetary policy announcement on Thursday and the latest United States inflation data.
The ECB is widely expected to raise interest rates by 25 basis points (bps) on Thursday, but analysts at Nomura believe that 'we do not forecast further rate hikes from the ECB after September.' However, they also note that 'risks to our forecast are skewed squarely towards further hikes due to ongoing tensions in the Middle East.'
On the US side, traders currently price in around a 60% chance of a 25-bps rate hike at next week's meeting, according to the CME FedWatch Tool. The Producer Price Index (PPI) and Consumer Price Index (CPI) data will play a crucial role in shaping expectations for the September 15-16 meeting.