The Euro remains supported by expectations of further ECB tightening, but EUR/USD is still struggling to escape the lower end of its July range.

EUR/USD traded close to 1.1371 at the end of the latest session, leaving the pair near July’s low after a subdued week for the single currency.

The Euro has fallen in six of the past eight completed sessions and is down around 0.4% for July, having retreated from a monthly high near 1.1481 to within one cent of June’s 1.1325 low.

Both ING and Nordea expect the European Central Bank to maintain a hawkish bias, with further interest-rate increases still likely.

However, neither the rate outlook nor the latest ECB meeting has generated enough momentum to push EUR/USD out of its narrow trading range.

ING expects the pair to remain supported by higher Eurozone rates, but retains a near-term downside bias towards 1.1380.

Nordea goes further, forecasting three additional 25-basis-point rate increases that would lift the ECB deposit rate from 2.25% to 3.00% by March 2027.

ING Sees September Hike Remaining in Play

ING had expected the ECB to leave rates unchanged while preserving the hawkish market pricing already embedded in Eurozone interest rates.

Its baseline was for a hawkish hold, with policymakers attempting to prevent inflation expectations from becoming unanchored as European gas and global energy prices remain elevated.

“The aim today could be – once again – to preserve market pricing to limit the risk of inflation expectations de-anchoring,” says ING FX strategist Francesco Pesole.

ING argued that achieving this might require a clear indication that a September rate increase remained possible, either through the press conference or subsequent guidance.

The bank noted that the market had already priced approximately 45 basis points of tightening by the end of 2026, setting a relatively high hurdle for the ECB to deliver an additional Euro-positive surprise.

“The hawkish bar set by the market via pricing isn’t low,” says Pesole.

ING nevertheless expected a firm ECB stance to limit the downside for short-dated Eurozone rates and, by extension, the Euro.

The difficulty is that supportive rate differentials have not translated into a decisive EUR/USD advance.

“A central bank meeting would normally be a prime catalyst for EUR/USD to break out of its tight trading range, but we do not expect that to happen,” ING says.

The bank retained a near-term downside bias, arguing that currency markets remained too relaxed about the potential consequences of further escalation in the Gulf.

“Unless the newsflow becomes more constructive, we look for EUR/USD to slip towards 1.1380 in the coming days.”

That target has already been reached, with the pair ending the latest session near 1.1371.

Nordea Forecasts Three More ECB Rate Increases

Nordea believes the ECB remains in a genuine tightening cycle rather than delivering one or two isolated increases.

The bank forecasts 25-basis-point hikes in September, December and March 2027, which would raise the deposit rate to 3.00%.

“The ECB did not touch rates today, but the message was in line with more rate hikes to come,” Nordea says.

“Our updated forecast still sees three more rate increases, but at a quarterly pace as opposed to a faster speed before.”

Nordea says the ECB’s latest communication left the door “wide open” to a September increase.

It highlights the central bank’s assessment that energy prices remained close to the assumptions used in its June forecast, which showed core inflation staying above 2% throughout the projection period even with two further rate increases already included.

The bank’s conviction does not depend on another major escalation in the Middle East or a renewed surge in oil.

Instead, Nordea expects broader price pressures and a relatively resilient Eurozone economy to keep the ECB tightening for longer.

“We think that we are amidst a hiking cycle rather than one or two isolated rate moves, and continue to expect the ECB to raise rates three more times.”

The bank has slowed the expected pace of tightening because oil prices have fallen from their earlier highs and the growth outlook has become less certain.

A rapid improvement in the geopolitical backdrop could reduce the need for further action, while a prolonged conflict and renewed energy-price increase could produce faster or additional rate increases.

Energy Inflation May Take Time to Spread

Nordea argues that markets and policymakers may still be underestimating the delayed second-round effects of higher energy costs.

Its research notes that during the previous inflation cycle it took several months for rising energy prices to feed into food, goods and services inflation.

It also took considerably longer for forward inflation expectations to peak than for spot inflation itself.

“We still see risks biased towards more second-round impact on inflation than what markets and the ECB expect,” Nordea says.

This possibility supports the case for further tightening even if the immediate increase in oil and gas prices begins to reverse.

The bank also points to inflation expectations that remain above the ECB’s target across several measures.

Its report shows five-year market inflation expectations around 2.26%, while household and large-company measures remain closer to 2.9%.

Nordea expects Eurozone growth of approximately 1% in 2026, although it acknowledges that the risks are tilted to the downside.

The bank nevertheless says the economy has remained more resilient than weak purchasing managers’ surveys would suggest.

Manufacturing output and retail sales increased in the available April and May data, while second-quarter growth may have been around 0.3%.

Nordea expects household consumption to remain the primary source of positive growth, supplemented by investment in technology and defence.

EUR/USD Technical Outlook

Despite the increasingly hawkish ECB outlook, the EUR/USD chart shows little evidence of sustained buying momentum.

The pair is trading close to 1.1371, below its 20-period moving average near 1.1372 and beneath session VWAP around 1.1381.

It also remains below the 200-period moving average near 1.1392, leaving the immediate intraday structure tilted to the downside.

EUR/USD attempted to recover towards 1.1390 during the latest session but failed to sustain the move.

The retreat confirms a band of resistance between approximately 1.1380 and 1.1392, with the 1.1400 level providing the next major barrier.

RSI stands around 44, having recovered from levels close to 30.

This indicates that selling pressure has eased and the pair is no longer oversold, but momentum remains below the neutral 50 threshold.

The technical picture is therefore consistent with consolidation near the lows rather than the start of a convincing Euro recovery.

Initial support is located around 1.1368, followed by July’s low near 1.1362.

A sustained break below that area would expose the June low around 1.1325.

On the upside, EUR/USD must first recover above 1.1375 and 1.1381.

A move through the 1.1390-1.1400 region would provide the first meaningful evidence that the Euro is developing greater breakout power.

Why ECB Hikes Have Not Lifted the Euro

The lack of a stronger EUR/USD response reflects the fact that much of the hawkish ECB outlook is already priced into the market.

Nordea notes that almost a full rate increase is priced by September, another is largely priced by December and part of a further hike is reflected in March 2027 contracts.

This leaves limited room for interest-rate expectations to move further in the Euro’s favour without a fresh inflation shock or more forceful ECB guidance.

The US Dollar also retains support from higher US rates, geopolitical uncertainty and the risk that elevated energy prices eventually damage global risk appetite.

ING says the current low-volatility environment may be underestimating how quickly Dollar demand could return if financial markets lose their tolerance for higher oil and gas prices.

The Euro is therefore receiving support from ECB tightening expectations, but not enough to overcome simultaneous demand for the Dollar.

Euro Forecast 2026: Latest Bank Projections

ING and Nordea both see a hawkish ECB, but the implications for EUR/USD remain restrained.

Nordea expects three further rate increases and a 3.00% deposit rate by March 2027, while ING believes policymakers will keep a September hike in play and defend current market pricing.

These forecasts should limit the risk of an immediate collapse in the Euro.

However, the rate outlook is already heavily reflected in market prices, while geopolitical and energy risks continue to favour the Dollar.

EUR/USD therefore remains vulnerable while below 1.1390-1.1400.

A break beneath 1.1362 would expose the June low near 1.1325, while only a sustained recovery above 1.1400 would suggest that hawkish ECB expectations are finally generating a meaningful upside breakout.