EUR\/USD has edged higher in early September and has reclaimed its 200-day moving average at around 1.1635 ahead of the European Central Bank\u2019s policy update. The move has been underpinned by European yields reacting more forcefully to summer energy-price gains and by market pricing for a hawkish ECB stance. Markets are close to fully discounting another rate hike by December, which sets a higher hurdle for any fresh hawkish surprise.<\/p>\n
The focus is on whether the ECB indicates further tightening beyond the next step, as that forward guidance is expected to shape the euro\u2019s reaction. A second increase in the current cycle would take the policy rate towards the top of the ECB\u2019s estimated neutral range of 1.75%\u20132.50%, against a backdrop of concern about second-round inflation effects.<\/p>\n
In rates, the latest divergence has persisted: the 2-year US Treasury yield rose by about 4 bps, while European yields have remained more energy-sensitive, helping keep the pair on a gradual upward trend over recent months.<\/p>\n\n\n\n