EUR/USD: ECB Hike Bets Clash With Trump's Push for Fed Cuts

Key Facts

EUR/USD enters a pivotal week as market sources expect the European Central Bank to raise rates by 25 basis points on September 10, while US President Donald Trump has renewed his demand for Federal Reserve cuts. That creates tension between market expectations and political preferences, but it does not guarantee a stronger euro.

The ECB left its three key rates unchanged on July 23, with the deposit facility at 2.25%, the main refinancing rate at 2.40% and the marginal lending rate at 2.65%. It also stressed that decisions would remain data-dependent and meeting-by-meeting, without a pre-committed rate path.

Germany's preliminary August reading put inflation at 2.9% year over year and 0.2% month over month, compared with annual inflation of 2.8% in July. Core inflation was 2.4%, while energy prices rose 10.5% from a year earlier, keeping price risks in focus before the ECB decision.

The ECB raised its key rates by 25 basis points on June 11 before holding them steady on July 23. That sequence helps explain expectations for another increase, but it does not make a hike certain, particularly because the bank says it will assess underlying inflation, policy transmission and economic risks.

In the United States, the Federal Reserve meets on September 15 and 16. Trump renewed his call for lower rates on September 4, but political pressure is not a monetary-policy decision; the outcome will still depend on Fed officials' assessment of inflation, the labor market and risks to the outlook.

EUR/USD finished the week just above 1.1600, with one technical assessment describing the pair as neutral to slightly bullish. Immediate resistance stands near 1.1634, while support is indicated at 1.1608 and then 1.1564. A sustained advance would therefore require a break above resistance, while a more hawkish Fed could renew pressure on the pair.

Attention now turns to the ECB decision at 14:15 Central European Time (CET) on September 10 and its economic projections at 15:45, alongside Germany's final inflation reading the same day. Focus then shifts to the Fed's September 15-16 meeting, making incoming data and the two banks' guidance more important than a one-way euro forecast.