The EUR/USD pair is trading with mild gains around 1.1625 during the early Asian session on Tuesday, as the Euro strengthens against the US Dollar amid expectations of a rate hike from the European Central Bank (ECB) later this week [1]. The ECB previously delivered its first rate hike since 2023 at its June policy meeting to address surging prices, but paused at its July meeting to assess ongoing developments [1]. The central bank is now anticipated to raise its benchmark rate for the second time this year at its policy meeting on Thursday, with Andrew Kenningham, chief Europe economist at Capital Economics, stating that the ECB governing council looks certain to raise its deposit rate from 2.25 percent to 2.5 percent [1].
Market participants are closely watching for any guidance from ECB President Christine Lagarde during her post-meeting press conference, though she is expected to emphasize that future decisions will be data-dependent [1]. Deutsche Bank analysts highlight the ECB policy decision as the key event for Europe this week, with their European economics team also expecting a 25 basis point rate increase, taking the deposit rate to 2.50% [1]. Investors are likely to focus on any signals regarding the likelihood of further tightening, especially in light of recently upgraded Euro Area growth projections for 2026 and 2027 and the current softer EUR/USD backdrop amid a stronger Dollar and higher US yields [1].
On the technical front, EUR/USD maintains a modest bullish bias, trading above the 100-day moving average and the 20-day simple moving average, with the Relative Strength Index (RSI) around 56, indicating constructive but not overextended bullish momentum [1]. Immediate resistance is seen at the Bollinger upper band near 1.1710, while initial support lies at the 20-day SMA around 1.1615 [1].
In the broader market context, a stronger-than-expected US jobs report showing 162,000 job additions in August has pushed Federal Reserve rate-hike bets above 60% [1]. Additionally, ongoing Middle East tensions, including tit-for-tat strikes between the US and Iran in the Strait of Hormuz, could drive flows into safe-haven assets such as the US Dollar [1].
CONCLUSION
The Euro is holding firm above 1.1600 against the US Dollar as markets anticipate a 25 basis point rate hike from the ECB, with investors focused on potential signals for further tightening. While technicals support a modest bullish bias for EUR/USD, external factors such as US economic data and geopolitical tensions may influence near-term market direction.