Euro Hits 8-week Low

The euro erased early gains to trade below $1.16, hitting its lowest level since April 6 and heading for a 0.7% weekly loss, as investors flocked to the US dollar after stronger-than-expected US jobs data. Nonfarm payrolls surged by 172,000 in May, nearly double the forecasted 85,000, prompting markets to fully price in a Federal Reserve interest rate hike by year-end. At the same time, investors braced for a likely European Central Bank rate hike next week, while cautiously eyeing potential progress in Middle East resolution efforts. Markets now see a near-certain 25-basis-point ECB rate increase at the June 11 meeting, with two or possibly three hikes expected this year. This follows data showing euro-area inflation rose to 3.2% in May, its highest in over two and a half years. However, uncertainty lingers after Eurozone GDP figures were revised to show a contraction in Q1 2026, the first since late 2022 and the steepest since mid-2020.

EURUSD decreased to 1.16, the lowest since April 2026. Over the past 4 weeks, Euro US Dollar lost 1.46%, and in the last 12 months, it increased 1.59%.

The euro climbed further above $1.16 as investors prepared for a likely European Central Bank interest rate hike next week, while maintaining cautious optimism about a potential Middle East resolution. Markets now price in a near-certain 25-basis-point ECB rate increase at the June 11 meeting, with two or possibly three hikes expected this year. This follows data showing euro-area inflation hit 3.2% in May, its highest in over two and a half years, with core and services inflation accelerating, signaling broadening price pressures beyond energy. However, uncertainty remains as policymakers balance high inflation with sluggish economic growth. ECB hawk Isabel Schnabel cautioned on Monday that it is premature to specify the number of rate hikes needed. Meanwhile, US-Iran negotiations continued, and military clashes between Lebanon and Israel persisted despite a pending US-brokered ceasefire.