Forex Today: ECB rate decision, US producer inflation data to lift volatility
Here is what you need to know on Thursday, September 10:
Following Wednesday's choppy action, the activity in financial markets remains subdued early Thursday ahead of the European Central Bank's (ECB) monetary policy announcements and July Producer Price ındex (PPI) data from the United States (US).
The US Dollar (USD) stabilized in the American session on Wednesday after spending the first half of the day under modest bearish pressure. Following the US Treasury Department's announcement that they will buy up to $6 billion in 10- to 20-year Treasury bonds during its buyback operation on Thursday, the 10-yield US T-bond yield climbed to its highest level since November 2023 and supported the USD.
In the European morning on Thursday, the USD Index moves sideways at around 98.70. On a yearly basis, the PPI is forecast to rise 5.3% in August, following the 4.7% increase recorded in July. Meanwhile, US stock index futures trade mixed after Wall Street's main indexes closed in negative territory on Wednesday.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.20% | -0.23% | -1.57% | -0.18% | -0.21% | 0.54% | 0.04% | |
| EUR | 0.20% | -0.03% | -1.34% | 0.01% | 0.00% | 0.79% | 0.25% | |
| GBP | 0.23% | 0.03% | -1.44% | 0.04% | 0.03% | 0.78% | 0.28% | |
| JPY | 1.57% | 1.34% | 1.44% | 1.47% | 1.43% | 2.18% | 1.67% | |
| CAD | 0.18% | -0.01% | -0.04% | -1.47% | 0.03% | 0.74% | 0.23% | |
| AUD | 0.21% | -0.01% | -0.03% | -1.43% | -0.03% | 0.75% | 0.24% | |
| NZD | -0.54% | -0.79% | -0.78% | -2.18% | -0.74% | -0.75% | -0.50% | |
| CHF | -0.04% | -0.25% | -0.28% | -1.67% | -0.23% | -0.24% | 0.50% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US 30-year Bond yield climbs despite expanded Treasury buybacks
Strategists at DBS highlight that the US 30Y yield “rose 4.3 bps to 5.29% despite US Treasury Secretary Scott Bessent’s announcement to triple bond buybacks to USD6 bn per operation, above the August 18 pledge of at least USD4 billion in the current quarter.” They argue that while “buybacks can support market liquidity,” their capacity to reassure investors on the broader macro backdrop is constrained, noting that “their ability to offset persistent concerns about inflation and the fiscal outlook is more limited.”
The ECB is widely forecast to raise key rates by 25 basis points (bps) after the September policy meeting. The ECB will also release revised macroeconomic projections and ECB President Christine Lagarde will deliver the policy statement and respond to questions at a press conference starting at 12:45 GMT. After closing marginally higher on Wednesday, EUR/USD fluctuates in a narrow channel below 1.1650 in the early European session.
Markets lean toward a more hawkish ECB path as Eurozone projections edge higher
Analysts at Deutsche Bank highlight that “investors also priced in a more hawkish path for the ECB, with an additional +9.0bps of hikes priced in by the June 2027 meeting, meaning that 86bps of further hikes are now priced by then.” For today’s decision, they note that the Governing Council is “widely expected to deliver a 25bp rate hike today, taking their deposit rate up to 2.5%.”
Looking beyond the near term, Deutsche Bank’s European economists think "that there’ll be small upward revisions to the GDP projections for 2026 and 2027, along with higher headline inflation for 2027 and 2028.” Even so, the bank expects the communication stance to remain cautious, with the ECB unlikely to offer strong signals on the future path of policy and instead to “repeat the ‘data dependent, meeting by meeting, no precommitment’ mantra.”
Gold (XAU/USD) managed to snap a three-day losing streak on Wednesday but retreated from daily highs following the US Treasury's announcement. XAU/USD holds steady above $4,400 in the European morning on Thursday.
GBP/USD stays in a consolidation phase at around 1.3550 after posting small gains on Wednesday.
USD/JPY recovered in the American session on Wednesday but still lost about 0.3% on the day. The pair moves sideways at around 153.50 in the European session.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.