Forex
Home›Forex›Major Pairs›Dollar advances against the euro as Fed-CB divergence…
Dollar advances against the euro as Fed-CB divergence grows
The ECB kept its deposit rate at 2.25% while investors raised odds of a Fed move, with CME derivatives pricing a 34% chance of a July action.
The US dollar continued advancing against major currencies, including the euro, as markets focused less on European Central Bank rhetoric and more on potential US policy changes, Action Forex reported.
The ECB held its deposit rate at 2.25%, with Christine Lagarde saying some Governing Council members had considered further action but the decision was unanimous to wait. The article notes the ECB deposit rate sits 150 basis points below the Fed’s, leaving room for additional hikes, and says futures pricing points to two rounds of monetary tightening in 2026, the first expected in September or October.
Still, the outlook for EURUSD is framed as a Washington decision rather than a Frankfurt one. In the FOMC’s latest rate forecasts, half of officials expected a hike and the rest expected no change, while rising oil prices above $100 per barrel increased the chance of a Fed move as early as July, with CME derivatives assigning a 34% probability.
The piece also links shifting rate expectations to broader macro drivers, including new US tariffs of 10% to 12.5% on several dozen countries covering more than 99% of total imports, set to replace temporary 10% duties expiring on 24 July. It adds that USDJPY is rising steadily as investors largely discount verbal interventions from Japan, amid a key inflation indicator rising to 1.6% after improving for the first time in three months.