EUR/USD extended its decline on Thursday, trading near 1.1604 and losing around 0.25% as renewed US Dollar strength pressured the Euro. The pair failed to gain meaningful support from the European Central Bank’s widely anticipated interest-rate increase, while stronger US producer inflation provided additional momentum for the Greenback.
The ECB raised all three key interest rates by 25 basis points, marking its second hike of the year and lifting the deposit facility rate to 2.50%. The central bank pointed to continuing inflationary pressures stemming from the conflict in the Middle East and reiterated its commitment to bringing inflation sustainably back toward its 2% medium-term target.
The ECB’s latest projections show headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. Inflation excluding food and energy is projected at 2.5%, 2.6% and 2.3%, respectively, over the same period. Policymakers warned that inflation risks remain tilted to the upside, while economic-growth risks are skewed lower.
The ECB also maintained a data-dependent approach, emphasizing that future rate decisions will be made meeting by meeting without committing to a predetermined policy path.
Across the Atlantic, US PPI increased 0.4% month-on-month in August, matching expectations but accelerating sharply from July’s 0.1% rise. Annual producer inflation reached 5.4%, exceeding the 5.3% forecast and rising from 4.8%. Core PPI rose 0.2% monthly, below expectations, while annual core inflation increased to 4.6%.
The US Dollar Index recovered toward 99.10 after touching 98.71, supported by rising Treasury yields. The 10-year US yield climbed to approximately 4.90%, its highest level since November 2023.
The latest PPI data reinforce expectations for a potential Federal Reserve rate hike next week, with CME FedWatch showing roughly a 64% probability of a 25-basis-point increase. Elevated Oil prices could further complicate the Fed’s inflation outlook.
Markets now await Friday’s US CPI report, which could provide a stronger signal about the Fed’s upcoming policy decision.
Trade Idea: Consider selling EUR/USD near 1.1620–1.1640, targeting 1.1550 and 1.1500, with a stop-loss above 1.1680 amid renewed Dollar strength.