Euro Hits 8-week Low

The euro weakened toward $1.135, its lowest level since June 26, amid a stronger dollar as investors weighed comments from ECB President Christine Lagarde. Lagarde said the inflation outlook for 2027 and 2028 is now higher than policymakers expected a few months ago, mainly due to higher energy prices, but noted there is no evidence yet of energy costs feeding into higher wages. She added that while the shock is too significant to ignore, a measured policy response remains appropriate to keep inflation under control. Money markets are pricing in roughly 100 basis points of ECB rate hikes by the end of 2027. Investors await key eurozone inflation data later this week for further clues on the ECB’s policy outlook. Meanwhile, the DXY gained as rising US Treasury yields and a hawkish Fed strengthened the case for US rates to remain higher for longer. Also, lack of progress in negotiations to reopen the Strait of Hormuz pushed oil prices higher and boosted safe-haven demand for the dollar.

EURUSD decreased to 1.14, the lowest since July 2026. Over the past 4 weeks, Euro US Dollar lost 2.19%, and in the last 12 months, it decreased 3.13%.

The euro traded around $1.138, close to its weakest level in two months, as the US dollar remained supported by fading optimism over progress in US-Iran talks and growing expectations of further Federal Reserve rate hikes this year. Iran said it would not soften its conditions for reopening the Strait of Hormuz after President Trump rejected its proposal. Speaking to Axios, Trump said Iran had “overplayed its hand” and that he expected negotiations to resume this week. On the monetary policy front, hawkish remarks from Fed officials, alongside economic data pointing to robust growth and a resilient labor market, have reinforced expectations of tighter US monetary policy. Meanwhile, in Europe, the US-Iran conflict and recent energy-price developments have continued to fuel concerns over renewed inflationary pressure. Money markets are now pricing in roughly 100 basis points of interest-rate hikes by the end of 2027.