Euro Strengthens as ECB Eyes Limited Rate Hikes
The European Central Bank is expected to raise its key interest rate again on Thursday, but economists believe there's limited room for further rises. The ECB has signalled a mix of urgency and caution in recent meetings, citing the economy's resilience and inflation cooling without severely impacting output.
Recent data shows Germany's economy grew faster than anticipated in Q2, with business morale hitting its highest level in a year. Growth in the eurozone's manufacturing sector also accelerated to its fastest pace in over four years, driven by strong new orders and expanding output.
The euro (EURUSD) has benefited from these developments, bottoming out in late July as Trump's Iran dealings appeared to stall. The Italy-Germany 10-year bond yield spread has narrowed dramatically this year, supporting the currency's strength.