The euro traded in a narrow range against the dollar on Monday, with market participants adopting a cautious stance ahead of a potentially decisive week.
The ECB’s rate decision on Thursday is the main event in view, with the central bank widely expected to hold rates at 2.25% following June’s increase.
Although recent inflation figures were below expectations, both headline and core readings remained above the ECB’s 2% target, which could entice policymakers to adopt a cautious stance.
Market participants currently anticipate two further interest rate increases by early 2027, which could strengthen the euro and eurozone yields.
In the meantime, Germany and euro zone ZEW figures are due Tuesday and could inject some volatility into the markets.
Beyond monetary policy, market participants are also monitoring oil prices following Iran’s announcement that it had received proposals aimed at preventing a broader escalation. Progress on this front could place downside pressure on oil prices, reducing inflation concerns and monetary policy tightening expectations.
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