Euro Surges on ECB Hawkishness as Rate Hike Odds Reach 96%

The Euro has been gaining strength against the US dollar due to the European Central Bank's (ECB) hawkish monetary policy outlook. The ECB is expected to raise interest rates in September, with market expectations now pricing in nearly 96% odds of a deposit rate hike to 2.50%. This move would make borrowing costs higher and support the Euro.

However, the gains for the EUR/USD pair are being capped by persistent strength in the US dollar. Stronger-than-expected US inflation data released this week reinforced expectations that the Federal Reserve (Fed) will raise interest rates before the end of the year. This would maintain a probability above 70% for a December hike.

Market participants are closely monitoring an upcoming speech by Federal Reserve Chairman Kevin Warsh at the annual economic symposium in Jackson Hole, Wyoming. The focus is on potential signals regarding the direction of US monetary policy and interest rates.