The EUR/USD pair has surged to a three-month high above $1.17, marking a significant gain of 0.14% on the day after adding 0.84% in the previous session. According to latest reports from Business Standard, the single currency has been boosted by expectation of rate hike by the European Central Bank, while the Federal Reserve is seen holding rates steady. On the National Stock Exchange, EUR/INR futures are trading at 111.79, up 0.63% on the day, reflecting the broader strength in eurozone fundamentals. The currency momentum appears set to continue as markets look ahead to upcoming economic data releases and policy developments, with markets now awaiting ECB President Christine Lagarde's speech scheduled for later today.
The euro's strong performance comes amid significant dollar weakness, with the dollar index shedding close to 1% after the US Treasury Department stepped in to provide relief to bond markets. As reported by Business Standard, the Treasury Department announced that it would at least double the maximum size of its liquidity-support buyback operations for longer-dated nominal securities, increasing the current maximum size of $2 billion per operation to at least $4 billion per operation. The dollar index slumped by near 1% yesterday and edged below 99 mark, creating favorable conditions for euro strength. Elevated oil prices amid ongoing geopolitical tensions are seen driving inflation and increasing expectations of an ECB rate hike, further supporting the euro's rally.
The eurozone economy demonstrated robust growth momentum in the second quarter of 2026. As reported by Business Standard, GDP in the euro area increased by 0.4% and in the European Union by 0.5% compared with the previous quarter. This represents a significant improvement from the first quarter, when GDP was unchanged in the euro area and rose only 0.1% in the EU. The annual growth figures show even stronger momentum, with GDP increasing by 1.0% in the euro area and 1.2% in the EU compared with the same quarter a year earlier, up from annual growth of 0.5% and 0.8% respectively in the previous quarter.
Labour market conditions in the eurozone showed steady improvement during the second quarter. According to Business Standard, the number of employed people rose 0.1% in both the euro area and the EU compared with the previous quarter. On a year-over-year basis, employment increased by 0.5% in both regions, indicating sustained job market growth. This labour market stability has contributed to the euro's strength against the US dollar, as investors respond positively to the combination of economic growth and employment gains. The sustained employment growth provides a solid foundation for continued euro strength in the coming quarters.
Recent economic data from Germany has shown marked improvement in business sentiment. As reported by Business Standard, the German ZEW Survey - Economic Sentiment came in at 34.2 in August, versus 26.3 prior, better than the estimates of 30.00. The ZEW Survey - Current Situation improves to -61.1 in August, compared to -77.6 in July, stronger than the -68.8 expected. This improvement in economic sentiment, combined with the euro's strength against the dollar, suggests growing confidence in the eurozone's economic outlook. However, elevated energy prices remain a concern for the Euro Area, particularly as tensions in the Middle East show little sign of easing.
Market focus remains on the European Central Bank's policy stance amid current economic conditions. According to Business Standard, ECB chief economist Philip Lane said the region's 3% inflation rate remains too high when considering potential adjustments to policy rates. The euro's strength against the dollar reflects market expectations of potential rate hikes by the ECB, contrasting with the Federal Reserve's expected steady rate policy. Current EUR/USD trading at $1.1702 reflects this policy divergence dynamic, with markets positioning for potential ECB action while awaiting further guidance from ECB President Christine Lagarde's upcoming speech.
