The European currency rose to the 2-month maximum versus US dollar on the expectations that the European Central Bank will raise interest rates earlier than the Federal Reserve due to the increasing inflation pressures in the euro zone.

According to the data released yesterday, the region’s inflation gained 2.4% from the level of the previous year, the fastest pace since October 2008.

Currency strategists at Danske note that the pressure on the ECB has strengthened ahead of its Thursday meeting. The specialists remind that the ECB has hiked rates when inflation was previously at this level, so it's possible they could do it again.

Analysts at Nomura International say that the situation may change if the US data this week is stronger than expected. In such case US yields will head higher providing support for the greenback.



Chart. H4 EUR/USD

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