UOB strategists highlight that EUR/USD slipped slightly to 1.1369 as comments from European Central Bank (ECB) Governing Council member Gediminas Simkus suggested a rate increase remains more likely than a hold. They also now expect one final 25 bps ECB hike in September to 2.50% on the deposit rate, followed by an extended pause, with risks skewed to further tightening if energy prices stay elevated.

Mild Euro pullback but hawkish ECB tilt

"The European Central Bank (ECB) left all three policy rates unchanged at its 23 Jul meeting, keeping the deposit rate at 2.25%."

"EUR/USD slipped 0.1% to 1.1369, as ECB Governing Council member Gediminas Simkus indicated that a rate increase remains more likely than a hold."

"We now expect one final 25 bps rate hike in Sep, taking the deposit rate to 2.50%, followed by an extended pause."

"However, additional tightening cannot be ruled out if elevated energy prices persist and lead to stronger second-round inflation effects."

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