The euro edged higher against the dollar on Thursday, holding near multi-week highs as market participants assessed a series of stronger-than-expected eurozone data alongside Wednesday’s Federal Reserve decision to hold interest rates.
Second-quarter eurozone GDP expanded by 0.4%, its strongest pace since early 2025 and above the 0.2% expected, while German inflation accelerated, driven by a pickup in energy costs tied to Middle East tensions.
Together, the figures reinforce expectations that the European Central Bank could tighten monetary policy in the coming months. The currency also continues to find support in elevated yields.
At the same time, sentiment has improved too, with the Eurozone Economic Sentiment Indicator reaching its highest level for several months. However, an escalation in tensions in the Middle East could negatively impact sentiment.
Attention now turns to tomorrow’s euro area inflation print, expected to hold broadly stable but above the ECB’s 2% target. A firmer reading could push yields up and support the euro, while a softer print could prompt traders to scale back interest rate hike bets. Market participants will also closely monitor geopolitical developments in the Middle East and their impact on oil prices and inflation concerns
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