EUR/USD drops 0.3% after ECB raises rates by 25 bps

The euro-dollar pair (EUR/USD) fell nearly 0.3% in the session after the European Central Bank raised its deposit rate from 2.25% to 2.50% and the main refinancing rate from 2.40% to 2.65%, marking its latest tightening move. The decision came as August inflation data in the Eurozone reached 3.3%, a new high for 2026 and above the ECB’s 2.0% target, reinforcing expectations of further rate adjustments ahead. The move followed a broader macro backdrop where economic activity in Europe has outperformed forecasts, though inflation risks persist, particularly from energy shocks linked to the Middle East conflict, which may yet weigh on prices. The ECB, led by President Christine Lagarde, reiterated that decisions would remain data-dependent, avoiding explicit guidance on future hikes. EUR/USD has since tested key technical levels, with resistance at 1.17127—a high not seen since May—and support at 1.15262, a confluence of recent lows and moving averages. The Dollar Index (DXY) hovered near 99 points, reflecting mixed sentiment on U.S. monetary policy divergence. Technical indicators show a flat RSI and balanced MACD, suggesting muted short-term momentum but heightened volatility as the pair navigates the September trading week.