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Euro: ECB tightening supports currency
Confirmed
In Short: The European Central Bank (ECB) is set to raise interest rates, supported by above-target inflation and a stronger economic outlook, according to Brown Brothers Harriman.
The European Central Bank (ECB) is expected to deliver another 25 basis point hike this week, taking the policy rate to 2.50%, according to Brown Brothers Harriman’s (BBH) Elias Haddad. This move is supported by above-target Eurozone inflation and a firmer growth outlook, which give the ECB scope to raise rates further.
Haddad also notes that the ECB will publish its September macroeconomic projections, with no expectation of material changes to the Eurozone GDP and inflation forecasts. He explains that improving leading economic indicators and slightly softer core inflation are broadly offset by higher energy prices, with Brent crude oil and natural gas prices up by 8% and 44%, respectively, compared to the June ECB meeting.
The US non-farm payrolls (NFP) report and escalating US-Iran tensions have lifted Federal Reserve (Fed) rate hike bets, which, along with the dollar’s safe-haven appeal, are capping the euro. However, rising geopolitical tensions and a resilient US labor market are keeping Fed tightening expectations elevated, which could weigh on Bitcoin.
Meanwhile, the EUR/USD currency pair declined modestly to 1.1578 on September 2, 2026, reflecting a complex interplay of hawkish Federal Reserve signals, rising inflation in the Eurozone, and broader dollar strength. The euro is also facing structural headwinds related to Europe’s reliance on energy imports, adding to its challenges.
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- We serve people living in the euro area by working to preserve the value of the euro.
- We steer interest rates with the aim of achieving price stability in the euro area.
- Here’s what UK investors should… As currency volatility persists, some traders are looking beyond traditional forex pairs to alternatives such as Bitcoin and… Will the pound rise against the euro?