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EUR vulnerable as energy prices favor USD despite expected ECB hike

OCBC expects another 25 bps ECB hike in September to 2.50%, but energy-driven terms of trade continue to weigh on the euro versus the US dollar.

Reported · Written up by our desk · Major Pairs

OCBC analysts Sim Moh Siong and Christopher Wong said the euro remains disadvantaged versus the US dollar because Europe is a net energy importer while the US is a net exporter, leaving EUR more exposed to sustained oil strength.

They noted that the ECB left rates unchanged in July and are looking for at least one more 25 bps hike in September to 2.50%, which is hawkish, but they argue the energy backdrop still tilts conditions in favor of the USD.

FXStreet also pointed to broader market positioning, with a risk-averse tone helping the USD hold its ground as traders focus on US preliminary July PMI data.

Meanwhile, EUR/USD traded below 1.1400, losing traction after earlier attempts to recover on upbeat Eurozone and German PMI data.

Latest closeEUR/USD 1.138 ▼0.2%

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