Euro Holds Near Two-Week Low on Risk Aversion

2026-09-02 15:58 By Joana Ferreira 1 min. read

The euro remained little changed just below $1.16, hovering near a two-week low, as investors moved away from riskier assets amid concerns over the economic impact of the energy shock from renewed hostilities in the Middle East.

Brent crude climbed to fresh six-week highs as traders weighed persistent risks to supply against signs that oil was still reaching global markets.

Meanwhile, Eurozone inflation data released earlier this week showed price growth at its highest level in nearly three years, reinforcing expectations for further ECB tightening.

Money markets are now pricing in almost a 100% probability of a rate hike next week, with another increase by year-end also seen as likely.

ECB policymakers Olli Rehn and Martin Kocher warned that a prolonged conflict and rising inflation risks could warrant further tightening.

In the US, markets are pricing in a 66% probability of a September rate hike following hawkish remarks from Fed Chair Kevin Warsh and a renewed rise in oil prices.



News Stream
Euro Holds Near Two-Week Low on Risk Aversion
The euro remained little changed just below $1.16, hovering near a two-week low, as investors moved away from riskier assets amid concerns over the economic impact of the energy shock from renewed hostilities in the Middle East. Brent crude climbed to fresh six-week highs as traders weighed persistent risks to supply against signs that oil was still reaching global markets. Meanwhile, Eurozone inflation data released earlier this week showed price growth at its highest level in nearly three years, reinforcing expectations for further ECB tightening. Money markets are now pricing in almost a 100% probability of a rate hike next week, with another increase by year-end also seen as likely. ECB policymakers Olli Rehn and Martin Kocher warned that a prolonged conflict and rising inflation risks could warrant further tightening. In the US, markets are pricing in a 66% probability of a September rate hike following hawkish remarks from Fed Chair Kevin Warsh and a renewed rise in oil prices.
2026-09-02
Euro Slips as Investors Digest Inflation Data
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.
2026-09-01
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