Eurozone GDP Surpasses Forecasts, Boosting EUR/USD
The EUR/USD currency pair has been on an upward trend, breaking above the 1.15 handle and reaching its highest level since June 16. This surge can be attributed to the recent economic data releases from the Eurozone, which have exceeded expectations.
According to the preliminary flash estimate published by Eurostat, the eurozone GDP grew at a rate of 0.4% in the second quarter, more than doubling the forecasted 0.2%. This growth is the fastest since early 2025 and has removed one of the main arguments against ECB tightening.
The July inflation print also showed a rise to 2.9% from 2.8%, with energy prices accelerating to 10.0%. Core inflation, excluding energy, food, alcohol, and tobacco, firmed to 2.5% from 2.4%. These numbers indicate that the ECB's warnings about second-round effects of elevated energy prices are materializing.
With the eurozone growth exceeding expectations and core inflation firming, the expected ECB path has been lifted, leading to a narrowing of the differential against Treasuries. The EUR/USD pair broke above 1.1500 within hours of the release and has maintained this level since.