Nordea expects further ECB increases in December and March, while Scotiabank sees scope towards 1.1700 if EUR/USD clears resistance.
The Euro to Dollar (EUR/USD) exchange rate recovered from a sharp fall below 1.1600 on Thursday as investors assessed US producer-price inflation and the European Central Bank’s latest rate increase.
At the time of writing, EUR/USD was trading around 1.1624, down 0.09% against the previous close, having rebounded from an intraday low near 1.1595.
Economists at Nordea believe the ECB has further tightening ahead, despite policymakers declining to commit to their next move.
“We maintain our baseline of two further 25bp rate hikes at quarterly intervals, with the next one in December and the second in March 2027.”
That path would take the deposit rate from 2.50% to 3.00%, providing potential support for the Euro through higher returns on euro-denominated assets.
Nordea sees more tightening behind cautious ECB language
The ECB raised its three key interest rates by 25 basis points, matching the increase Scotiabank had described as fully priced before the announcement.
Its monetary policy statement projected inflation at 3.0% this year and 2.5% in 2027, with the latter revised higher.
“We are not pre-committing to a particular rate path,” the ECB said.
Scotiabank had expected a forceful endorsement of further near-term tightening as recovering oil prices threatened broader price pressures.
Nordea reads the inflation projections as evidence that September’s increase will be followed by others.
“A very extended period of inflation above target strongly supports the case for more rate hikes.”
However, Nordea also notes that markets have moved to price a faster tightening path than its own forecast, leaving scope for those expectations to reverse if December remains the likeliest next move.
We believe that limits how much support the Euro exchange rates can draw from further hikes alone: their timing, and whether expectations move beyond what is already priced, will matter.
US inflation keeps the Dollar side of the trade unsettled
The US producer-price figures showed core prices, excluding food and energy, rose 0.2% in August, easing from July’s 0.3% increase, with annual inflation at 4.6%.
Headline prices increased 0.4% on the month and 5.4% annually as energy prices jumped 4.2%.
The slower monthly core reading offers encouragement, but persistent price pressure leaves the FED’s response an important constraint on Euro gains.
The recovery keeps Scotiabank’s case for a EUR/USD move towards 1.1700 in focus.
Its pre-release technical assessment nevertheless identified an obstacle just above current levels.
“The 200 day MA (1.1634) continues to offer resistance on a closing basis, and we continue to highlight the absence of any major resistance ahead of the local high around 1.17.”
A close above 1.1634 would strengthen the case for another attempt at 1.1700, while a renewed fall through the session’s 1.1595 low would undermine the recovery.
Our currency coverage draws on live market data, official economic releases and published bank research.
