The euro edged higher toward a one-week peak near $1.142 on Thursday as investors awaited the European Central Bank’s policy decision. Policymakers are widely expected to leave interest rates unchanged while keeping open the option of a possible hike in September.
In June, the ECB implemented its first rate increase in three years and indicated that any further policy adjustments would be guided by incoming data. Since then, weaker figures on inflation, wage growth, economic activity, and inflation expectations have reduced the pressure for another immediate move.
However, the recent jump in oil prices, driven by escalating tensions in the Middle East, has reignited concerns that higher energy costs could stoke inflationary pressures. This may encourage the ECB to retain a cautious tone.
Money markets are still pricing in at least two additional rate cuts by year-end, with the next move fully anticipated for September.
