The Euro has shown an upside bias against the US Dollar, trading within a defined range near 1.1630, according to UOB analysts Quek Ser Leang and Lee Sue Ann. Recent EUR/USD price action has been contained between 1.1619 and 1.1653, with expectations for the Euro to remain within a 1.1585–1.1670 band in the coming weeks. Despite near-term downward pressure, UOB doubts a sustained break below 1.1505 given prevailing momentum, and notes that the upside bias remains intact but capped within the stated range [1].
MUFG’s Lee Hardman highlights that EUR/USD has been gradually moving higher, supported by more energy-sensitive European yields and expectations of a hawkish European Central Bank (ECB). The pair has moved back above its 200-day moving average near 1.1635, with markets almost fully pricing another rate hike by December. This raises the bar for a hawkish surprise from the ECB, as market participants anticipate a policy update later today. The ECB is expected to deliver a second hike of the current tightening cycle, potentially lifting the policy rate to the top of the estimated neutral range of 1.75%-2.50%. The performance of the Euro will depend on how strongly the ECB signals further rate hikes, with the rate market already almost fully priced for another hike by December [3].
Hardman also notes that European yields have been more sensitive to higher energy prices over the summer compared to US yields, which continued yesterday with the 2-year US Treasury yield increasing by around 4bps. This sensitivity has contributed to the gradual rise in EUR/USD over the past couple of months [3].
There is no mention of specific market reactions or analyst opinions regarding the Japanese Yen in relation to the Euro or ECB decision in the sources provided. However, UOB analysts report that USD/JPY weakness is stabilising around 153.45 after a drop to 152.92 and recovery to 153.54, with expectations for consolidation between 153.00 and 154.30 intraday. Their 1–3 week view remains negative, with the year-to-date low at 152.08 as the next key support and strong resistance at 155.20 [2].
CONCLUSION
The Euro is trading with an upside bias within a defined range, supported by expectations of a hawkish ECB policy update and sensitivity to energy prices. Markets are almost fully pricing in another ECB rate hike by December, raising the hurdle for a hawkish surprise. The overall sentiment is moderately positive for the Euro, with market impact expected to be medium as traders await the ECB's decision.