Why is the Euro rising amid in-line US inflation data

The EUR/USD pair gains ground to near 1.1655 during early European trading hours on Thursday. The Euro (EUR) strengthens against the US Dollar due to the ECB’s hawkish stance. Markets will focus on the Jackson Hole symposium on Friday. The ECB is expected to raise key interest rates in September after a June hike to combat inflation amid geopolitical tensions. Markets now price in a nearly 96% chance of a 2.50% deposit rate increase at the September meeting. Hawkish ECB rhetoric supports the Euro. ECB Executive Board member Isabel Schnabel stated borrowing costs must rise further due to Middle East conflict risks and a resilient Eurozone economy. Eurozone economic data shows business activity growing at its fastest pace this year. US Commerce Department data revealed the Fed’s preferred inflation gauge (core PCE) held steady at 3.3% YoY in July, with headline PCE rising to 3.7% YoY, slightly above expectations. Monthly PCE increased 0.2%, surpassing a 0.1% consensus. Traders will monitor Fed Chairman Kevin Warsh’s Jackson Hole speech, which could hint at US interest rate outlook. Scotiabank strategists note ECB rhetoric remains firm, with Isabel Schnabel reinforcing inflation risks from geopolitics and Eurozone growth. Technical analysis shows EUR/USD maintains a bullish trend above the 100-day SMA, with resistance at 1.1710 and support at 1.1587. The Relative Strength Index (RSI) at 65.6 suggests firm but moderate upside momentum. The Euro is the currency for 20 EU countries in the Eurozone, the second most traded currency globally. The ECB in Frankfurt manages monetary policy, focusing on price stability through interest rate adjustments. High interest rates attract foreign investment, strengthening the Euro. Economic indicators like GDP, PMI, and trade balance significantly influence the currency. A strong economy encourages rate hikes, boosting the Euro, while weak data weakens it. The four largest Eurozone economies (Germany, France, Italy, Spain) account for 75% of the region’s GDP, and trade balance data also impacts the Euro’s value.