Euro climbs above 1.15 on strong growth, Fed hold

The euro surged past the 1.15 level against the dollar on Thursday, as a combination of stronger-than-expected eurozone economic growth and renewed weakness in the greenback following the Federal Reserve's decision to hold interest rates steady fueled broad demand for the single currency.

Fed Hold and Dissent Weigh on Dollar

The EUR/USD pair rose to around 1.1527, gaining roughly 0.5% on Thursday after the Federal Reserve voted 9–3 on Wednesday to leave its benchmark rate unchanged in a range of 3.5% to 3.75%. Three officials — Beth Hammack, Neel Kashkari and Lorie Logan — voted in favor of a quarter-point increase, but Chair Kevin Warsh's post-meeting comments were interpreted as dovish by markets. The Wall Street Journal News Corp ↘ 1.67% reported that the decision left Warsh's pledge to end above-target inflation "to rest for a second straight meeting on words rather than action".wsj+1

Citi said Warsh's remarks suggested "higher rates might be the dominant but not the only solution to higher inflation," indicating the Fed could continue relying on broader financial conditions rather than imminent rate increases. US second-quarter GDP slowed to an annualized 1.5%, while the core personal consumption expenditure price index rose just 0.1% in June, further undermining the case for near-term tightening.currencynews

Eurozone Growth Surprises to the Upside

The euro's advance was reinforced by data showing the eurozone economy expanded 0.4% in the second quarter, up from stagnation in the first three months and ahead of economists' expectations for 0.2% growth. Annual growth accelerated to 1.0%. Spain led major economies with 0.7% quarterly expansion, while Germany, France and Italy each recorded 0.2% growth.euronews+1

German inflation accelerated from 2.4% to 2.8% in July, maintaining pressure on the European Central Bank to remain cautious. Deutsche Bank expects the ECB deposit rate to rise from 2.25% to 2.50% in September, calling a hike "more or less a done deal".currencynews

What Comes Next

Friday's preliminary eurozone inflation release will provide the next catalyst, with headline inflation expected to edge higher from 2.8% to 2.9%. A firm reading would reinforce September ECB hike expectations and could push EUR/USD toward 1.16. On the US side, the Employment Cost Index could revive dollar demand if wage pressures prove stronger than expected. UBS forecasts the pair at 1.16 by September and 1.18 by year-end, while Bank of America remains more cautious, projecting a pullback to 1.12 before a recovery later in the year.currencynews