Euro Slips as Investors Digest Inflation Data

2026-09-01 09:25 By Joana Ferreira 1 min. read

The euro weakened slightly below $1.16, as investors assessed the latest Eurozone inflation data and its implications for the ECB’s rate outlook.

Annual inflation rose to 3.3% in August, its highest level since September 2023 and well above the ECB’s 2% target, driven largely by a surge in energy prices amid continued fighting in the Middle East.

The data reinforced expectations of an ECB rate hike as soon as this month, despite easing services and core inflation.

Markets are now pricing the deposit rate at around 2.70% by December, implying roughly an 80% probability of a second hike following an expected September move.

ECB policymaker Olli Rehn warned that a prolonged conflict could keep inflation elevated, while Martin Kocher said rising inflation risks could require a swift rate hike if confirmed in the ECB’s next forecasts.

Meanwhile, the dollar remained supported after Fed Chair Kevin Warsh struck a hawkish tone, with markets pricing a 68% probability of a September Fed hike.



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