Euro: Recovery against US Dollar supported by data – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad reports EUR/USD is firmer but still below 1.1700 as Germany’s IFO survey rises to a one-year high, echoing Eurozone PMI and ZEW improvements. He says strengthening Eurozone activity and above-target inflation support a September European Central Bank (ECB) rate hike, contrasting with dovish Fed risks. Haddad notes a widening EU-US rate gap, with resistance near 1.1800 and support at the 200-day moving average at 1.1632.

Eurozone data and ECB expectations

"EUR/USD is firmer but holding under 1.1700."

"Germany’s IFO business climate survey improves more than expected in August. Headline rose to a one year high at 88.8 (consensus: 87.2, July: 86.7) driven by more favorable current conditions and expectations. The increase echoes the recovery signaled by the Eurozone’s August PMI and ZEW surveys."

"Bottom line, improving Eurozone economic activity and above target inflation reinforces the case for the ECB to resume raising rates at the September 10 meeting (95% priced-in)."

"By contrast, Fed risks remain tilted toward a dovish repricing. A widening EU-US rate gap underpins the end-July upswing in EUR/USD."

"Important resistance sits near 1.1800 with immediate support offered at the 200-day moving average of 1.1632."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)