Euro Slips Toward Two-Week Low Amid Rate-Hike Bets

2026-08-31 11:51 By Joana Ferreira 1 min. read

The euro hovered around $1.16, near its weakest level in almost two weeks, as higher oil prices and renewed inflation concerns strengthened expectations for higher interest rates in both the euro area and the US.

Oil prices rose after the US said it had attacked an Iranian island in the Strait of Hormuz, while Tehran said it had retaliated by targeting US assets in the region, adding to geopolitical and inflationary pressures.

Markets are pricing the ECB’s deposit rate at around 2.70% by December, implying roughly an 80% probability of a second rate hike following an expected September move, from the current 2.25%.

Investors also see euro-area rates approaching 3% by late 2027.

Meanwhile, Fed Chair Kevin Warsh struck a hawkish tone on Friday, warning that inflation has not slowed meaningfully and that the Fed still has “work to do” without clearer evidence of easing price pressures.

Markets now see roughly a 60% chance of a September Fed rate hike.



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Euro Slips Toward Two-Week Low Amid Rate-Hike Bets
The euro hovered around $1.16, near its weakest level in almost two weeks, as higher oil prices and renewed inflation concerns strengthened expectations for higher interest rates in both the euro area and the US. Oil prices rose after the US said it had attacked an Iranian island in the Strait of Hormuz, while Tehran said it had retaliated by targeting US assets in the region, adding to geopolitical and inflationary pressures. Markets are pricing the ECB’s deposit rate at around 2.70% by December, implying roughly an 80% probability of a second rate hike following an expected September move, from the current 2.25%. Investors also see euro-area rates approaching 3% by late 2027. Meanwhile, Fed Chair Kevin Warsh struck a hawkish tone on Friday, warning that inflation has not slowed meaningfully and that the Fed still has “work to do” without clearer evidence of easing price pressures. Markets now see roughly a 60% chance of a September Fed rate hike.
2026-08-31
Euro Slips as Hawkish Fed Tone Supports Dollar
The euro weakened to around $1.16, touching its lowest level since August 19, as investors turned to the US dollar following hawkish remarks from Federal Reserve Chair Kevin Warsh, despite European data pointing to renewed inflationary pressures. In his first major speech since becoming chair in May, Warsh warned that inflation has not meaningfully slowed and that policymakers need clearer evidence of easing price pressures, otherwise the Fed still has “work to do.” Meanwhile, inflation data from France and Spain strengthened expectations for further ECB tightening. EU-harmonized inflation rose to 2.7% in France and 4.5% in Spain, the latter its highest since 2023. Markets now see the ECB deposit rate rising to 2.80% by March next year from 2.25% currently, with roughly a 60% chance of a hike to 3%. Recent ECB minutes and Reuters reports also pointed to a possible September hike, although policymakers remain reluctant to signal further tightening.
2026-08-28
Euro Steady as Investors Await Warsh’s Jackson Hole Speech
The euro was little changed at $1.165 as investors digested economic data and awaited Federal Reserve Chair Kevin Warsh’s speech at the Jackson Hole symposium for clues on the US rate outlook. Meanwhile, inflation data from France and Spain showed renewed price pressures, strengthening expectations of an ECB rate hike in September. EU-harmonized inflation rose to 2.7% in France, a three-month high, while Spain’s climbed to 4.5%, its highest since 2023 and more than double the ECB’s 2% target. Markets now price the ECB deposit rate at 2.80% by March next year, up from 2.25% currently, and around 2.90% by late 2027, implying roughly a 60% chance of a hike to 3%. Recent ECB minutes pointed to another likely increase, while Reuters reported that policymakers are prepared to raise rates in September to contain the economic fallout from the Iran war, though they remain reluctant to signal further tightening beyond that.
2026-08-28