Euro holds recent gains despite high Oil prices with ECB decision in focus

EUR/USD holds above 1.1630 with rallies capped below Wednesday's highs at 1.1654.
Risk aversion is likely to keep Euro gains subdued, with all eyes on the ECB monetary policy decision.
The Dollar remains on its back foot ahead of the US CPI release, which keeps the pair from depreciating further.

Guillermo Alcala FXStreet

The Euro (EUR) edges up against the US Dollar (USD) on Thursday, but remains capped below Wednesday’s highs, at the 1.1650 area so far. The risk-off sentiment amid high Oil prices and surging global yields is likely to keep EUR/USD rallies subdued, with investors awaiting the outcome of the European Central Bank’s (ECB) monetary policy meeting, due later on the day.

The ECB is widely expected to hike rates for the second time this year, bringing its benchmark Rate on Deposit Facilities to 2.5% from the current 2.25%. The main focus of the event, however, will be on President Lagarde’s press conference for further insight into the bank's plans, amid rising inflationary pressures as the Middle East Conflict pushes energy prices higher.

Earlier in the day, Germany’s final Harmonised Index of Consumer Prices (HICP) confirmed preliminary figures of a 0.2% increase in August and a 2.9% year-over-year (Y-o-Y) gain, from 0.9% and 2.8% respectively in July. The impact of these figures on the Euro has been marginal.

Euro holds recent gains as the USD loses its safe-haven role

The Greenback, on the other hand, is failing to draw support from its traditional safe-haven status, weighed down by a mix of circumstances, namely the US Dollar debasement trade, amid the disappointment over the US Treasury's bond buyback program, USD/JPY carry trade unwinding, and growing concerns about the ballooning US government debt.

FX Strategists at Brown Brothers Harriman argue that “even if a September Fed hike becomes a done deal, we doubt USD will make new cyclical highs,” as “tightening by other major central banks limits policy divergence, with the ECB widely expected to deliver a 25bps hike.”

In the US calendar, Producer Price Index (PPI) data, due later on the day, is expected to show that inflation accelerated to a 5.3% Y-o-Y rate in August from 4.7% in July. The main focus this week, however, is on the Consumer Price Index (CPI) release, due on Friday, which will be analysed in detail to confirm market expectations of a Federal Reserve (Fed) rate hike next week.

Economic Indicator

Harmonized Index of Consumer Prices (MoM)

The Harmonized Index of Consumer Prices (HICP), released by the German statistics office Destatis on a monthly basis, is an index of inflation based on a statistical methodology that has been harmonized across all European Union (EU) member states to facilitate comparisons. The MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP), released by the German statistics office Destatis on a monthly basis, is an index of inflation based on a statistical methodology that has been harmonized across all European Union (EU) member states to facilitate comparisons. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.

AUD/USD extends the range play above 0.7200 as traders await US inflation data

AUD/USD is seen extending its consolidative price move above 0.7200 during the Asian session on Thursday amid mixed cues. Rising RBA rate-hike bets keep the Aussie close to its highest level since May 14. However, hawkish Fed expectations and escalating US-Iran tensions offer some support to the US Dollar, capping the currency pair as traders await US inflation figures.

USD/JPY consolidates around 153.50 as bears turn cautious ahead of US inflation

USD/JPY stabilizes above 153.50 during the Asian session on Thursday, but remains near a seven-month low set earlier this week as hawkish BoJ repricing continues to underpin the Japanese Yen. Meanwhile, rising September Fed rate-hike bets and escalating US-Iran tensions help ease US Dollar selling pressure, offering some support to the currency pair ahead of US inflation figures.

Gold sticks to gains, eyes $4,450 as USD remains depressed ahead of US inflation data

Gold turns higher following an intraday dip to sub-$4,400 levels, and moves further away from a one-week low touched the previous day. The commodity, however, remains below the $4,450 pivotal point as bulls seem hesitant ahead of US inflation figures. The US Producer Price Index report will be published later today, while the US Consumer Price Index is due on Friday.

XRP rally cools, XLM heads toward a make-or-break support

Ripple (XRP) and Stellar (XLM) trade under pressure on Thursday after losing over 2% and 3% so far this week. XRP and XLM are both nearing their crucial support zones, which could determine the next directional move. Meanwhile, mixed derivatives and on-chain data suggest upside potential remains limited for both altcoins. CryptoQuant’s summary data shows cautious signs for both altcoins.

Jobs opened the door for the Fed — inflation decides whether it walks through

The latest US jobs report did not end the debate over the Federal Reserve’s (Fed) next move. It may have done something more subtle: it gave policymakers permission to keep their options open. After months of softer labour market signals, August delivered a stronger-than-expected rebound.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.