The EURUSD pair is hovering around 1.16300 midweek, with a slow but steady push higher in its sights. What makes the single currency so strong? Expectations that the European Central Bank (ECB) will tighten conditions further. A 25‑basis‑point hike is fully priced in for tomorrow's meeting, which would take the key rate from 2.40% to 2.65%. Why? Inflation in the eurozone is still sticky at 3.3%, and rising oil costs due to Middle East turmoil mean that the Consumer Price Index (CPI) fire isn't out yet. To make things even more interesting, some market players are now factoring in another move by the regulator in December—to 2.90%—a scenario that only adds to the euro's appeal.
Across the Atlantic, the Fed's path is much foggier. After August's blockbuster jobs report—which showed 162,000 new positions—the odds of monetary tightening on September 16 shot up to around 60%. Right now, however, the market is torn, with the probabilities of a rate hike versus holding steady being more or less evenly split. This week's US CPI print could be the deciding factor. A hotter‑than‑anticipated number would likely seal the deal for an increase and give the dollar a boost, while a softer reading could pour cold water on hawkish expectations and send EURUSD on another leg higher.
Of course, it isn't all sunshine for the euro. Brent crude is approaching $100 per barrel, which spells trouble for the energy-hungry eurozone and weighs on GDP growth. As if that weren't enough, German exports surprised to the downside, reminding everyone that the region's industrial engine is still sputtering. That said, these look more like long‑term headaches than near‑term deal‑breakers. Going forward, the pair will be driven by what happens at ECB and Fed meetings, as well as the growing divide between their messages on interest rates.
The final recommendation:
— Buy EURUSD at the current price (1.16300), aiming to reach 1.18500 within two weeks.
— To shield your position from adverse market movements, place a Stop Loss order at 1.15000.
This content is for informational purposes only and is not intended to be investing advice.
