Euro Recovers Ahead of ECB Forum

The euro climbed back above $1.14, rebounding from one-year lows hit last week, as investors are now focusing on the ECB’s Sintra Forum and upcoming inflation data from Europe’s major economies. ECB President Christine Lagarde will open the forum on Monday, with the most anticipated panel on Wednesday, featuring Lagarde, new Fed Chair Kevin Warsh, and Bank of England Governor Andrew Bailey. Markets will watch for signals on their economic assessments and policy outlook. Since the interim US-Iran ceasefire reopened the Strait of Hormuz, oil and inflation expectations have fallen, prompting markets to reduce bets on interest rate hikes by the ECB and Bank of England. On the data front, Spain’s EU-harmonized consumer price index rose 3.6% year-over-year in June, unchanged from May and holding at its highest level since June 2024.

EURUSD decreased to 1.14, the lowest since June 2025. Over the past 4 weeks, Euro US Dollar lost 2.15%, and in the last 12 months, it decreased 1.89%.

The euro traded below $1.14, close to June 2025-lows, under pressure from broad US dollar strength amid expectations that the Fed will raise interest rates later this year following hawkish comments from Fed officials last week. In the Euro Area, the ECB raised interest rates by 25bps this month, in line with expectations. However, ECB President Lagarde said yesterday that the central bank does not need to respond more aggressively to developments stemming from the Middle East conflict, noting that inflation is expected to return to target over the medium term. Markets have since pared back some expectations for additional ECB tightening following Lagarde’s comments, though investors still price in at least one more 25bps hike this year. Meanwhile, weaker economic data added to the cautious outlook. Preliminary PMI readings showed that private sector activity in Germany contracted at the fastest pace since 2024, while the Euro Area also remained in contraction territory.