Euro at $1.15745 Tests 1.1641 as Bund Yields Hit 3.21% and Fed Hike Odds Collapse to 35%

The euro traded $1.15745 against the dollar Tuesday, down 0.06% on the session, after pulling back below the 1.1600 handle during Asian hours. That marks the third consecutive session in which the pair has approached the figure and failed to close above it.

The rejection sits directly on top of a genuine advance. EUR/USD closed Friday, August 14 at 1.1570 against 1.1521 the prior week, and touched 1.16 intraday — the highest print since June 2026. The pair has gained 1.39% over the past month and 1.01% over the trailing four weeks, recovering from a June 24 low at 1.1355 that marked the bottom of the summer range.

Over twelve months the euro is still down 0.59%. The 52-week range runs 1.1325 to 1.2079, a 754-pip band. EUR/USD opened 2026 at 1.1721 and hit a four-and-a-half-year high above 1.20 in late January before the US-Iran conflict inverted every assumption underneath the pair.

Tuesday's pullback carried the whole complex. Sterling fell 0.14% to $1.35298, dropping below 1.3600 as UK labour market data softened. The dollar rose 0.20% against the yen to 159.638, a more than two-week high. The Australian dollar slipped 0.06% to 0.71024, below the 0.7100 handle. USD/CAD climbed above 1.3800 to 1.38673. USD/TRY posted a record high at 47.9186.

That breadth matters. When every major pair moves the same direction inside a single session, the driver is dollar-side, not euro-side. The catalyst was Brent crude reaching approximately $91.76 per barrel and the 30-year Treasury yield printing 5.323%, the highest since 2007 — a combination that revives the inflation premium and the dollar's carry simultaneously.

European equities confirmed the risk tone. The pan-European Stoxx 600 fell 0.51%, France's CAC 40 lost 0.55%, Italy's FTSE MIB dropped 0.59%, Germany's DAX shed 0.38%, and the FTSE 100 held nearly flat at less than 0.1% lower.

The euro's problem is that it is being asked to rally on a policy convergence story while the commodity that drives eurozone inflation trades at $91.76 and the currency's own central bank has to respond to it.

Friday's 1.1570 Close Delivered a Second Straight Weekly Gain

The week of August 10 to 14 produced a two-sided US inflation picture and a net gain for the euro. Wednesday's soft CPI print pressured the dollar and lifted gold to a ten-week high. Thursday's firmer core PPI reversed part of it, reviving September rate-hike bets and pulling the precious complex back from its peaks. EUR/USD closed the week at 1.1570 against 1.1521 the prior Friday — a 49-pip gain, or 0.43%.

Brent surged more than 7% across that same week as Iran-Oman talks on reopening the Strait of Hormuz stalled and Washington signalled tougher measures against Tehran. Crude closed Friday at $88.60 and has added another $3.16 since, reaching $91.76 Tuesday. That is the single most important number in this analysis, and it works against the euro.

The euro held near two-month highs anyway because the dollar stayed on the defensive. Softer US data — July retail sales down 0.6% against a 0.1% expected gain, the University of Michigan sentiment index at 51.0 from 55.2, tame July CPI — did more damage to the dollar than the oil move did to the euro. The market chose the Fed repricing over the energy transmission.

The structural backdrop supports that choice. The ECB held rates at 2.25% in July following June's hike, and second-quarter eurozone GDP growth of 0.4% keeps the outlook constructive rather than recessionary. Money markets have moved to price the ECB deposit rate at 2.75% by early 2027, implying two more increases with the first potentially at the September 10 meeting.

The pair now sits inside a 1.1400 to 1.1750 base case that has contained it through August. It has spent the month grinding higher within that band without producing a directional break, and the week's calendar is stacked to force one.

Wednesday brings eurozone final CPI, German PPI and the FOMC minutes. Friday delivers flash US, eurozone and UK PMIs, the Philadelphia Fed index, jobless claims, and the opening of the Jackson Hole symposium with Fed Chair Kevin Warsh speaking.

The Rate Differential Is Compressing: 137.5 Basis Points and Narrowing

The mechanical driver of every sustained EUR/USD move is the policy rate gap, and that gap is shrinking for the first time in two years.

The Federal Reserve holds the funds rate at 3.50% to 3.75%. The ECB holds its deposit facility rate at 2.25%. At midpoints, the nominal differential stands at 137.5 basis points in the dollar's favour — a range of 125 to 150 basis points depending on which end of the Fed corridor is used.

The market is pricing two European hikes against roughly one American hike. Money markets fully price the ECB deposit rate reaching 2.75% by early 2027, with intermediate prints at 2.70% by December and 2.76% to 2.78% by the first quarter of 2027. On the US side, hike odds for September have collapsed to roughly 35% from close to 50% before last week's data, with the probability of a hold at 69.9%. Markets no longer fully price any US increase by year-end.

Run the arithmetic forward. If the ECB delivers two 25 basis point increases and the Fed delivers one, the differential compresses from 137.5 to 112.5 basis points. If the ECB delivers two and the Fed delivers none, it falls to 87.5 basis points. That is a 50 basis point compression from current levels, and 50 basis points of differential compression historically supports a 300 to 500 pip move in EUR/USD.

The configuration is unusual and worth stating plainly: both central banks are leaning toward tightening rather than easing. Currency markets rarely see that. It means the pair is trading the relative pace of two hiking cycles rather than the conventional divergence between one easing and one tightening bank.

That is also why the move has been slow. Convergence trades grind; divergence trades trend. The euro's advance from 1.1355 on June 24 to 1.1600 in mid-August covers 245 pips over eight weeks — 2.2% — which is the market pricing convergence incrementally rather than repositioning wholesale.

The June Fed projections showed nine of eighteen policymakers penciling at least one further increase before the end of 2026. That split is the number Wednesday's minutes will clarify.

The ECB Is 70% to 90% Priced for September 10 at 2.50%

The European Central Bank raised all three policy rates by 25 basis points on June 11 — its first increase since 2023 and the first move by any major central bank to fight the stagflationary pressure from the Middle East conflict. It held at 2.25% on July 23.

Market pricing for the September 10 meeting has run between 70% and 90% probability of a further 25 basis point increase to 2.50%, with the range depending on the day and the oil print. The most recent reads put it above 84%, and one measure had it above 90% following the August 14 data.

The reversal that produced this is the important context. The ECB spent the opening months of 2026 cutting rates as inflation converged on 2% — January HICP printed 1.7%, the lowest since September 2024, with core at 2.2%, the weakest since October 2021. The US-Iran war ignited in late February, energy costs spiralled across a continent that imports its energy, and by June the bank was hiking.

President Christine Lagarde has been explicit about the mechanism. She has stated the bank anticipates inflation remaining well above target until the first half of 2027, and warned that the longer energy prices stay elevated, the more likely they are to drive broader inflation through indirect and second-round effects. At the July press conference she referenced oil repeatedly, making clear the September decision hinges on crude.

Brent at $91.76 is therefore not an ambiguous input. It is the variable that determines whether the ECB hikes, and it has risen for three consecutive sessions with no resolution mechanism visible.

The constraint on the other side is growth. The ECB's own 2026 growth forecast sits near 0.8%, and hiking aggressively into an economy running below 1% carries real damage. That tension is why the market prices two increases rather than four, and why the deposit rate path tops out at 2.75% rather than higher.

Germany's fiscal expansion offsets some of it. The country is raising a record €512 billion in 2026 for infrastructure upgrades and defence, part of a €1 trillion programme whose multiplier effects take twelve to eighteen months to reach GDP data.

Eurozone Inflation Accelerated to 2.9% With Core at 2.5%

Eurozone flash HICP for July came in at 2.9% year-over-year, accelerating from 2.8% in June. Core inflation firmed to 2.5% from 2.4%. Services inflation strengthened. That is three components moving the wrong direction in the same month.

The trajectory across 2026 tells the story of the energy shock. January printed 1.7% with core at 2.2%. Inflation then climbed through the spring as the conflict escalated, peaking at 3.2% in May before easing to 2.8% in June as oil briefly returned toward pre-conflict levels. July reversed that improvement.

Market-based measures confirm the persistence. Swaps pricing euro area inflation over the next twelve months sit around 2.4%, above the ECB's 2% target. That is the number the Governing Council watches for evidence that second-round effects are embedding, and it has not come down.

The transmission from crude is direct and quantifiable. Every $10 increase in oil prices subtracts approximately 0.3% from eurozone GDP and adds 0.5% to headline inflation — a stagflationary impulse the ECB cannot offset without risking contraction. Brent has moved from $88.60 on August 14 to $91.76 Tuesday, a $3.16 increase, and from roughly $72 in early July. That $20 move maps to roughly 1.0 percentage point of added headline inflation and 0.6 percentage points subtracted from growth if it holds.

Europe imports its energy. The United States produces its own. That asymmetry is why identical oil prices are inflationary in both regions but growth-destructive in only one, and it is the structural argument against the euro that the rate-convergence trade keeps overlooking.

Wednesday brings eurozone final CPI and German PPI. The final print rarely deviates from flash, but German producer prices matter because they lead consumer prices by roughly two quarters and capture energy costs before they reach the household.

Friday's flash PMIs for August carry more weight. Eurozone private-sector activity readings will show whether the energy shock has begun to bite manufacturing output, and a weak manufacturing print alongside firm inflation is the configuration that caps the euro regardless of ECB pricing.

Q2 GDP Printed 0.4% Against a 0.2% Forecast

The eurozone economy expanded 0.4% in the second quarter, double the 0.2% consensus and the fastest pace since early 2025. The first quarter had been flat. That two-quarter sequence — zero then 0.4% — is the data point that converted ECB hike pricing from possible to probable.

The beat matters for the currency in a specific way. A central bank facing energy-driven inflation and a contracting economy cannot hike; it has to absorb the shock. A central bank facing energy-driven inflation and an economy accelerating off a flat quarter can hike, and the market immediately prices it. Growth surprising to the upside is what gave the September meeting its 70% to 90% probability.

Firmer growth combined with higher inflation gives the euro more backbone than it has had at any point since the conflict began. The combination is exactly the one that supports a currency: the central bank gains room to tighten without breaking the economy underneath it.

The durability is the open question. Growth is projected to moderate in the near term before gradually gaining momentum, which means the 0.4% print may prove the high-water mark rather than the start of an acceleration. The ECB's full-year 2026 forecast near 0.8% implies the back half runs materially slower than the second quarter.

Germany carries the fiscal offset. The €512 billion issuance programme for 2026 funds infrastructure and defence, and that spending is the structural medium-term tailwind underneath European growth. The multiplier takes twelve to eighteen months to reach GDP, which puts meaningful contribution in 2027 rather than the current period.

The US comparison has flipped. American growth remains stronger in absolute terms — the Atlanta Fed's third-quarter GDPNow estimate sits at 4.3% — but the rate-sensitive channels are contracting. July retail sales fell 0.6%. Housing starts collapsed 12.4% to 1.239 million. Consumer sentiment sits at 51.0.

Relative growth momentum drives FX more than absolute levels, and the momentum differential has narrowed sharply in the euro's favour over two months.

Bund Yields at 3.21% — the Highest Since May 2011

The German 10-year Bund yield reached 3.21%, its highest level since May 2011 and a fifteen-year peak. It gained more than 30 basis points in July alone, the largest monthly increase since March, and has added 12.56 basis points over the past four weeks and 43.23 basis points over twelve months.

The policy-sensitive two-year Bund climbed above 2.8%, its highest since July 2024, rising more than 25 basis points as traders built ECB tightening positions.

That move is the euro's foundation. A currency needs yield to attract capital, and Bunds paying 3.21% at the ten-year point are competitive in a way they have not been in a decade and a half. The 2-year at 2.8% against a 2.25% deposit rate prices roughly two hikes directly into the curve.

Three forces are lifting German yields simultaneously. Oil-driven inflation expectations feed the long end. ECB tightening pricing lifts the front end. And Germany's record €512 billion issuance programme expands supply into a market that spent a decade absorbing negative-yielding paper.

The problem is that US yields are doing the same thing faster. The 10-year Treasury sits at 4.72% to 4.73%. The 30-year printed 5.323%, the highest since 2007. Long-dated sovereign yields rose across every major market Tuesday — this is a global term-premium event, and Bunds are participants rather than outperformers.

That leaves the 10-year US-German spread at roughly 157 basis points, and Bunds have been swinging around 3.1% in August while tracking Treasuries rather than diverging from them. A spread that moves in parallel does not generate a currency trend.

The Italian BTP spread over Bunds has held near its tightest level since 2010, which removes the periphery-risk premium that historically capped euro rallies during rate-rise episodes. That is a genuine structural improvement and the reason a 3.21% Bund is not triggering fragmentation concerns.

For EUR/USD, the yield story is supportive but not decisive. The euro needs the spread to compress, not just the level to rise.

The Fed Repricing That Broke the Dollar: Hike Odds From 65% to 35%

The dollar's August weakness traces to a specific and rapid collapse in US tightening expectations.

At the start of the month, markets assigned roughly 63% to 65% probability to a September Fed hike. That has fallen to approximately 35%, with the probability of a hold at 69.9%. Year-end tightening is no longer fully priced. A week ago the market carried a 64% chance of an increase by December.

The data drove every basis point of it. July retail sales fell 0.6% against expectations for a 0.1% gain — a 70 basis point miss. Excluding autos, sales fell 0.3% versus a forecast 0.2% gain. The University of Michigan sentiment index dropped to 51.0 from 55.2. July CPI printed tame. July housing starts collapsed 12.4% to a 1.239 million annualised rate against a 1.35 million forecast, with single-family starts down 9.9% to 808,000 and 15.7% year-over-year.

Thursday's core PPI came in firmer and briefly reversed part of the repricing, which is why the dollar's decline has been choppy rather than linear.

Wednesday's FOMC minutes carry outsized weight for a specific reason. The July post-meeting statement ran just 130 words. Fed Chair Kevin Warsh, who took office in May 2026, has consistently argued for leaner central bank communication, which means the minutes provide the only detailed view of the internal balance of opinion. The June projections showed nine of eighteen policymakers penciling at least one further increase before year-end — a dead-even split that the market has been trading blind.

If the minutes reveal that hawkish bloc held broader conviction than the vote implied, September odds move back toward 50% and the dollar recovers everything it has lost this month. EUR/USD returns to the 1.1500 handle.

Warsh's Jackson Hole remarks Friday carry the same asymmetry. With Brent at $91.76 and the SPR at 1982 lows, any acknowledgment that energy-driven inflation requires a policy response reverses the trade outright.

The dovish outcome is largely priced. The hawkish one is not.

DXY 99.29 and the Trendline That Broke

The Dollar Index fell to 99.29 early Monday, its lowest level since June 5, and in doing so broke the bullish trendline that had defined its ascent from the January low at 95.55.

That is a clean technical breakdown in the denominator of the pair, and it is the second pillar of the euro's August advance alongside the ECB pricing. EUR/USD's move from 1.1355 on June 24 to 1.1600 in mid-August maps almost exactly onto the dollar's slide from its summer highs.

The composition of the dollar's weakness is what makes it interesting. DXY at 99.29 with the 30-year Treasury at 5.323% is not a monetary easing. It is foreign capital demanding higher compensation to hold US duration while simultaneously reducing exposure to the currency — a term-premium and credibility event driven by fiscal arithmetic rather than the policy rate.

US federal debt has surpassed $39 trillion and is approaching $40 trillion, with annual interest servicing exceeding $1 trillion. That constrains the Federal Reserve in ways individual data prints cannot alter, and it is the structural argument for dollar depreciation that runs beneath the cyclical rate story.

The euro is the mechanical beneficiary. It carries the second-largest weight in global reserves and accounts for 31% of all foreign exchange transactions with average daily turnover above $2.2 trillion. Capital reallocating away from dollar assets has limited alternatives at that scale.

Tuesday's session cut against the trend. The dollar gained on every major cross — euro down 0.06%, sterling down 0.14%, Australian dollar down 0.06%, yen down 0.20% to a two-week low — as crude and Treasury yields rose together. That combination temporarily restores the dollar's carry advantage and its safe-haven bid simultaneously.

The distinction that matters for the forecast: risk-off moves boost the dollar and temporarily override rate differentials. The August euro rally is a rate-differential trade. Every escalation in the Middle East reasserts the safe-haven channel and interrupts it.

DXY holding above 99.00 keeps the interruption alive. Losing it resumes the euro's advance.

Brent at $91.76 Is the Euro's Structural Problem

Crude is the variable that decides this pair, and it is currently pointed the wrong way for the euro.

Brent reached approximately $91.76 per barrel Tuesday, its highest in more than two weeks, after President Trump rejected extending the memorandum of understanding with Iran that expired Monday. He repeated his position on declaring the Strait of Hormuz US territory and threatened military action against Oman. A senior Iranian official responded that the country would shift to a fully offensive posture if diplomacy fails. Israel struck Lebanon over the weekend. West Texas Intermediate traded $84.39, up 0.78%, touching $85.

The US Strategic Petroleum Reserve sits at its lowest level since 1982, which removes the coordinated-release mechanism that capped prior spikes and forces the entire adjustment through the futures curve.

For the euro, this is a two-sided problem that resolves negatively. Higher crude raises eurozone inflation, which supports ECB hiking and therefore the currency. Higher crude also destroys eurozone growth, which constrains ECB hiking and undermines the currency. The $10-per-barrel rule of thumb — 0.3% off GDP, 0.5% onto headline inflation — describes a stagflationary impulse, and stagflation is not a currency-positive configuration.

The 2026 record demonstrates it. The euro hit 1.20 in late January before the conflict escalated. It fell to 1.1355 by June 24 with the war running the entire period. Every phase of escalation has produced euro weakness, and every phase of de-escalation has produced euro strength — the April ceasefire took the pair to 1.17 within days.

That pattern is the cleanest predictor available. EUR/USD is a short Brent position expressed in currency form.

The asymmetry compounds it. A resolution in the Strait sends crude down $15 and lifts the euro toward 1.18, but it also removes the inflation impulse that justifies September ECB hiking, capping the move. A genuine supply disruption sends Brent above $100, crushes eurozone growth, and takes the pair below 1.1400 regardless of what the ECB does.

Oil down helps the euro modestly. Oil up hurts it severely.

The Spread That Actually Sets the Pair: 157 Basis Points

Strip away the narrative and EUR/USD is a spread trade. The 10-year US Treasury at 4.72% against the 10-year German Bund at 3.15% to 3.21% leaves the differential at roughly 151 to 157 basis points.

That spread has been remarkably stable through August, and stability is why the pair has ground rather than trended. Bunds have been swinging around 3.1% while tracking US Treasuries, which means both curves are absorbing the same global term-premium shock at similar magnitudes. Parallel moves produce no currency signal.

The front end is where the compression is happening. The 2-year Bund above 2.8% — its highest since July 2024 — against a US 2-year anchored by collapsing hike expectations is the part of the curve that has moved in the euro's favour. Policy-rate expectations drive the short end, and the short-end spread is narrowing faster than the long-end spread.

That distinction explains the pair's behaviour precisely. EUR/USD has gained 1.39% in a month, which is what a front-end convergence trade delivers when the long end stays put. It has not broken 1.1600, which is what happens when the 10-year spread refuses to compress.

For a decisive move above 1.1650, the 10-year differential needs to fall through 140 basis points. That requires either the Bund to rise faster than the Treasury — plausible if the ECB confirms September and the Fed confirms a hold — or the Treasury to fall outright, which requires US growth data to deteriorate beyond the rate-sensitive channels already contracting.

Neither happened Tuesday. The 30-year Treasury printed 5.323%, the 10-year hit 4.73%, and long-dated yields rose globally in sync.

The Italian BTP-Bund spread near its tightest since 2010 removes the fragmentation discount that historically punished the euro during European yield rises. That is one structural headwind permanently removed from the pair, and it is why 3.21% Bunds are supporting the currency rather than raising redenomination questions.

Watch the 2-year spread for direction and the 10-year spread for magnitude.

Cross-Rate Confirmation: Sterling at 1.3530, Yen at 159.64

The euro's performance against non-dollar crosses separates genuine euro strength from generic dollar weakness, and the readings are mixed.

Sterling fell 0.14% to $1.35298 Tuesday, dropping below 1.3600 as UK labour market data weakened. That underperformance against the euro's 0.06% decline means EUR/GBP firmed on the session. The pound spent July benefiting from the view that the Bank of England would hold rates higher for longer while the ECB paused. That premise has inverted — the eurozone now has the harder inflation problem and the more probable next hike — and sterling has given ground accordingly. UK gilt yields remain the pressure point ahead of the autumn Budget.

The yen is the clearest dollar signal on the board. USD/JPY rose 0.20% to 159.638, a more than two-week high, in a session where the 30-year Treasury printed 5.323%. Yen weakness against a rising US long end is the textbook carry response and confirms that Tuesday's move was rate-driven rather than risk-driven.

Commodity currencies broke the other way from what crude would imply. The Australian dollar fell 0.06% to 0.71024 despite Brent at $91.76, and USD/CAD climbed above 1.3800 to 1.38673 despite Canada's energy exposure. Both are trading the dollar's yield advantage rather than their own terms of trade, which reinforces that this is a broad greenback move.

USD/TRY posted a record high at 47.9186, which is idiosyncratic but reflects the same pressure applied to a currency with no policy defence.

The read-across for EUR/USD: the euro fell least among the majors Tuesday. A 0.06% decline against 0.14% for sterling and 0.20% for the yen means the single currency is the strongest performer inside a dollar-positive session, which is the signature of an underlying bid rather than a fading rally.

That relative resilience is the ECB pricing showing through. It does not overcome a 137.5 basis point differential on its own, but it establishes that the euro has a floor built from something other than dollar weakness.

Technical Structure: 1.1612–1.1641 Above, 1.1482 and 1.1355 Below

The chart is cleanly defined and the levels are tight.

EUR/USD settled above resistance at 1.1535 to 1.1516 last week, which converted that band into the first line of support beneath current price. The pair now approaches resistance at 1.1612 to 1.1641 — the zone that has capped every attempt since June and the level that decides whether the medium-term trend turns.

Above 1.1641, the structure flips bullish and the pair opens 1.1740, the top of the three-month range, then the 1.1849 horizontal barrier. Below it, the correction inside the medium-term downtrend remains intact and the first downside target is 1.1482, with 1.1355 — the June 24 low — behind it.

The intermediate reference points are dense. The 1.1536 to 1.1542 zone provided the bounce that produced the August rally. The 1.1500 handle is psychological support and the level the pair defended repeatedly through July. Beneath that, 1.1476 marks the March 2026 swing low.

The structural level is 1.1400. That is the 23.6% Fibonacci retracement of the 2022 to 2026 rally, and losing it on a weekly close would confirm a deeper corrective phase toward 1.1200.

Momentum is constructive but not extended. The pair sits near its 8-day, 21-day, 50-day and 100-day exponential moving averages simultaneously — a compression that resolves in one direction with force once a catalyst arrives. That clustering is the technical equivalent of the fundamental standoff: two central banks tightening, one currency going nowhere.

The three-month range runs 1.1359 to 1.1740, a 381-pip band containing all price action since mid-May. The pair is currently in the upper half of it at 1.1573, having spent most of the summer in the lower half.

Volatility compression at these moving-average clusters, combined with a calendar carrying FOMC minutes, flash PMIs and Jackson Hole inside three sessions, makes a range break the base case for this week rather than continued grind.

EUR/USD Price Forecast: 1.1641 and 1.1500 Decide the Range

The forecast reduces to two levels and three events.

Upside case. EUR/USD at 1.15745 must first reclaim 1.1600 on a closing basis after three consecutive failures at the figure. Clearing that opens 1.1612 to 1.1641, and a daily close above 1.1641 converts the medium-term structure from corrective to bullish, exposing 1.1740 and then 1.1849. The required inputs are specific: dovish FOMC minutes Wednesday confirming the September hold, eurozone final CPI holding at 2.9% with German PPI firm, and flash PMIs Friday showing eurozone activity holding up under $91.76 Brent. Warsh at Jackson Hole must avoid signalling that energy inflation demands a response.

Base case target for August: 1.1641. Bullish target on a confirmed break: 1.1740.

Downside case. Failure at 1.1600 for a fourth session puts 1.1535 to 1.1516 under test, and that band is the floor of the August advance. Beneath it, 1.1500 is psychological and 1.1482 is the first structural target. Loss of 1.1476, the March swing low, opens 1.1400 — the 23.6% retracement of the 2022–2026 rally — and then 1.1355, the June low. A hawkish read from Wednesday's minutes, with September Fed hike odds moving back above 50%, produces this outcome directly.

Downside target on a hawkish repricing: 1.1500 initially, 1.1400 on continuation.

The variable neither scenario controls is crude. Brent at $91.76 with the SPR at 1982 lows and no ceasefire mechanism is a stagflationary tax on a net energy importer. Every $10 on the barrel removes 0.3% from eurozone GDP and adds 0.5% to headline inflation, and the growth damage eventually outweighs the ECB hiking it justifies.

Verdict: the euro's August advance is a genuine rate-convergence trade, priced off a differential compressing from 137.5 basis points toward 112.5 as the ECB hikes September 10 while the Fed holds. That trade is roughly two-thirds complete at 1.1573. It has 70 pips of room to 1.1641 and needs the FOMC minutes to cooperate to get there. Brent above $95 takes it off the table entirely.

That's TradingNEWS