Euro holds near $1.16 as ECB hike meets fresh US CPI focus

The euro is consolidating near the $1.16 area after the European Central Bank delivered another 25-basis-point rate increase. The move was widely expected, but the currency struggled to extend gains as the US dollar remained supported by higher yields and safe-haven demand.

ECB policymakers are facing a difficult balance between persistent energy-driven inflation and weaker growth risks. With oil prices remaining elevated, markets are watching whether further tightening could be needed if inflation expectations become more entrenched.

The next major catalyst is US CPI. Stronger-than-expected inflation could increase expectations for Federal Reserve tightening and weigh on EUR/USD, while a softer reading could give the euro room to recover.

Traders should also monitor European bond yields, oil prices and comments from ECB officials for clues about the euro's near-term direction.