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Source: Newsmaker.id
The euro strengthened slightly against the US dollar during Asian trading on Friday (August 28). The EUR/USD pair traded around 1.1650, extending modest gains from the previous session.
The euro's rise was underpinned by the European Central Bank's (ECB) continued hawkish policy outlook. Markets are increasingly confident that the ECB will raise the deposit rate to 2.50% at its September meeting.
These expectations were reinforced by comments from ECB Executive Board member Isabel Schnabel. She assessed that borrowing costs still need to rise, as the Middle East conflict and the resilience of the Eurozone economy could keep inflation risks elevated.
According to the ECB Watch Tool, the probability of an ECB deposit rate hike in September is now approaching 96%. This sentiment supports the euro, particularly as the market views the policy divergence between the ECB and the Federal Reserve as a key factor.
However, gains in EUR/USD remain limited, as the US dollar continues to draw support from strong inflation data. Markets still estimate a greater than 70% chance of a Federal Reserve rate hike in December, even though there is a roughly 65% probability that the Fed will hold rates steady in September.
Newsmaker Analysis: EUR/USD retains support from hawkish ECB expectations, but this is not yet strong enough to break through major resistance levels while the US dollar remains solid. The 1.1650 area is a crucial level for maintaining the euro's momentum. If Kevin Warsh’s speech at Jackson Hole strikes a hawkish tone, EUR/USD risks falling back toward the 1.1600 area. Conversely, if Warsh signals a more cautious approach, the euro could retest the 1.1700 area. (asd)
Source: Newsmaker.id