EUR/USD: Euro Awaits ECB Rate Hike With Oil Nearing $100. Dollar Is Dormant Too

Europe’s energy shock points toward tighter policy Thursday. Strong US payrolls have revived the Fed too.

💶 Euro holds before Thursday’s decision

• The EURUSD pair held near $1.16 Monday, with the euro showing little movement despite a significant repricing of global interest rates.
• The pair’s calm reflects competing forces: an expected European Central Bank hike this week could support the euro, while strong US employment Friday data strengthened the dollar’s yield advantage.
• The ECB is widely expected to raise its deposit rate by 25 basis points to 2.50% on Thursday. That would be its second increase since June, when policymakers began responding to energy-driven inflation.
• Eurozone inflation accelerated to 3.3% in August from 2.9%, driven mainly by energy. Core inflation, which excludes volatile food and fuel, eased to 2.4%.

🛢️ Oil complicates the ECB’s message

• Brent crude approached $97 after the US and Iran attacked vessels around the Strait of Hormuz over the weekend. Shipping through the route has fallen sharply, raising the threat of prolonged disruption.
• Europe imports much of its energy, making expensive oil particularly unfriendly to regional households and businesses.
• The hike decision itself may be almost fully priced, meaning the euro’s larger reaction could come from Christine Lagarde’s guidance.
• Hawkish outlook — language suggesting rates may rise further — could push European bond yields higher and support the euro. A cautious “one and done” message may weaken the currency.

📊 CPI decides the dollar’s answer

• Across the Atlantic, the US added 162,000 jobs in August, nearly triple the 56,000 forecast, while unemployment held at 4.1%. Traders now see roughly a 57% chance that the Federal Reserve raises rates next week.
• US producer prices arrive Thursday before CPI on Friday. Hot inflation would reinforce the Fed-hike case and could push the euro-dollar below $1.16, exposing support near $1.1550 and $1.1500.
• Softer figures would challenge dollar bulls and give the pair another opportunity to test $1.1660–$1.1700. Curiously, the dollar gained little from stronger payrolls or higher rate expectations Monday.
• US fiscal concerns and the inflationary consequences of the Gulf conflict appear to be limiting demand. Even with Monday off for US folks, quiet calendars have become a distant cultural memory.