Euro surges as traders ignore Fed’s hawkish minutes

The shared currency gained over 0.85% during the North American session on Wednesday, even though the latest Federal Reserve minutes had a “hawkish” tone, with some participants, along with the three dissenters, suggesting that raising rates could be necessary if the disinflation process stalls. The EUR/USD trades at 1.1673.

EUR/USD climbs as lower US yields offset hawkish Fed minutes

The Federal Reserve unveiled its July meeting minutes, in which the dissenters acknowledged that inflation appears broad-based and supported a more “restrictive policy.” The minutes revealed that policymakers are worried about inflation, with many participants assessing “that policy tightening would likely be necessary if inflation did not decline.”

The FOMC minutes revealed that there was no discussion of easing policy. The new Fed Chair, Kevin Warsh, asked the Committee whether it would be better for the US central bank to host only six monetary policy meetings, which would allow two months of full data. Meanwhile, the schedule for 2026 will remain unchanged.

The US Treasury buyback of long-end bonds revealed that the Treasury is worried about elevated yields.  Sources cited by Bloomberg said, “The measures are essentially a method of yield curve control designed to suppress long-term rates that are deemed too elevated and at risk of derailing the economic expansion.”

The Eurozone Harmonized Index of Consumer Prices (HICP) in July rose to 2.9% from 2.8% in June, matching preliminary forecasts. Underlying inflation expanded at a 2.5% pace, up from 2.4% in June.

The data further cement the case for higher interest rates in Europe. The European Central Bank (ECB) led by Christine Lagarde, is expected to increase rates by 25 basis points at the September 10 meeting. The money market had priced in an 88% chance of a rate hike, according to Prime Terminal data.

Ahead, the US economic docket will feature Initial Jobless Claims, a speech by St. Louis Fed President Alberto Musalem and S&P Global Flash PMIs. In Europe, traders will eye Germany’s Producer Price Index (PPI), the Trade Balance and speeches by ECB members,

EUR/USD Price Forecast: Technical outlook

In the daily chart, EUR/USD trades at 1.1678. The pair holds a bullish near-term bias as price advances above the cluster of longer-term support defined by the triple simple moving average set around 1.1470 and the reclaimed trend-line break near 1.1459, suggesting underlying demand on dips. Momentum is stretched, with the 14-period Relative Strength Index at 72.8, placing the market in overbought territory and hinting that upside progress could slow despite the constructive trend backdrop.

On the topside, the next significant hurdle is the horizontal resistance line at 1.1849, which caps the immediate upside and would need to give way to extend the current rally. On the downside, initial support is seen at the 1.1678 area, followed by the former trend-line barrier at 1.1459 and the triple simple moving average cluster around 1.1470, where buyers are likely to re-emerge on a deeper corrective pullback.