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Euro seen at risk as EUR/USD breaks below 1.1400

MUFG expects the ECB to keep a September rate hike on the table, but says rising energy costs could weigh on euro support and increase downside risk versus the dollar.

Reported · Written up by our desk · Major Pairs

MUFG strategist Derek Halpenny said the ECB’s latest communications point to a likely September rate hike, which he views as nearly fully priced in markets.

Halpenny cautioned, however, that euro support may fade if energy costs continue to rise, warning of increased downside risks for the euro versus the US dollar.

He pointed to the EUR/USD break below 1.1400 and weaker European data contrasted with a more resilient US economy, while noting that the US dollar gained broadly in the prior session.

MUFG also highlighted a technical shift suggesting short term dollar strength, citing bullish momentum for further gains and saying the previous high for the US dollar index is within reach if key levels are broken.

Latest closeEUR/USD 1.138 ▼0.2%|Dollar index 101.44 ▲0.3%

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