Euro Rises on Strong Eurozone Data and ECB Rate Hike Bets

The euro strengthened to $1.148, its strongest level since June 17, as stronger-than-expected eurozone economic data reinforced expectations that the European Central Bank could deliver a second interest rate hike this year, potentially as soon as September, offsetting concerns over rising Middle East tensions and a divided Federal Reserve. The eurozone economy expanded by 0.4% in the second quarter, beating forecasts of 0.2% and marking its strongest growth since early 2025. Spain led with a 0.7% expansion, while Germany, France, and Italy each grew 0.2%. Firmer inflation readings in Germany and Spain also supported expectations of further ECB tightening. Meanwhile, renewed US airstrikes on Iran lifted oil prices and weighed on risk sentiment. The Federal Reserve added to policy uncertainty on Wednesday by keeping interest rates unchanged, despite three FOMC members dissenting in favor of a rate hike.

EURUSD increased to 1.15, the highest since June 2026. Over the past 4 weeks, Euro US Dollar gained 0.9%, and in the last 12 months, it increased 0.51%.

The euro weakened to $1.145 on Thursday as investors weighed stronger-than-expected eurozone economic data against rising geopolitical tensions and uncertainty over the US interest rate outlook following a divided Federal Reserve decision. Robust GDP growth across the bloc and firmer inflation readings in Germany and Spain reinforced expectations that the European Central Bank could deliver a second rate hike this year, potentially as soon as September. Germany and Italy both expanded by 0.2%, beating forecasts of 0.1%, while France's economy rebounded by 0.2%. Spain once again outperformed, with growth accelerating to 0.7%, and the Dutch economy grew 0.4%. Meanwhile, renewed US airstrikes on Iran in response to attacks on American forces across the Middle East lifted oil prices and dampened risk appetite. The Federal Reserve also added to market uncertainty on Wednesday by keeping interest rates unchanged, despite three FOMC members dissenting in favor of a rate hike.