Euro Hits 4-week Low

The euro weakened toward $1.15, touching its lowest level since mid-August, as the dollar remained supported ahead of a widely expected Federal Reserve rate hike on Wednesday. Rising oil prices, driven by the intensifying war in the Gulf, further weighed on market sentiment. Inflationary pressures remain elevated after six months of US-Israeli conflict with Iran pushed oil prices well above $100 a barrel, disrupting the outlook for monetary policy and triggering bouts of selling in long-dated government bonds. The ECB raised rates last week and signaled that further tightening could follow, prompting markets to price in at least one more interest rate hike from the ECB this year. Attention now turns to a busy week for central banks, with the Fed decision on Wednesday followed by the Bank of England on Thursday and a widely expected Bank of Japan rate hike on Friday. The BoE is expected to leave rates unchanged, although the vote is likely to be close.

EURUSD decreased to 1.16, the lowest since August 2026. Over the past 4 weeks, Euro US Dollar lost 0.12%, and in the last 12 months, it decreased 1.67%.

The euro held around $1.16, near its weakest level in more than a week, as the dollar remained supported by growing expectations that the Federal Reserve will raise interest rates next week following hotter-than-expected US core inflation data. In Europe, the ECB raised rates by 25 basis points on Thursday, warning that inflation is likely to remain well above its 2% target for an extended period. ECB President Christine Lagarde called the decision a “no-brainer” and cautioned that the return to target, currently projected for the end of 2027, could be delayed further. With the inflation outlook deteriorating sharply, further tightening is increasingly seen as likely, according to sources familiar with the discussions, with another hike potentially coming as soon as October. Money markets are pricing in three additional ECB rate increases by March next year, followed by a fourth by June.