FX.co ★ Euro Holds Near One-Month Low Ahead of Fed Decision

The euro stayed under pressure below the $1.14 level, trading near a one-month low as renewed US-Iran tensions pushed oil prices higher and reignited inflation worries. Caution also prevailed ahead of the Federal Reserve’s policy decision later in the day. The Fed is widely expected to keep interest rates unchanged, though markets still see roughly a one-in-three chance of a 25-basis-point increase.

In the euro area, money markets are factoring in nearly two 25-basis-point rate hikes by the European Central Bank by March 2027. ECB policymaker Peter Kazimir said at least one additional rate increase will likely be necessary to bring inflation under control, noting that a weaker economic outlook could justify even more tightening than investors currently anticipate. Meanwhile, Chief Economist Philip Lane described the ongoing inflation shock as moderate, a view that supports further policy tightening. Investors are now looking ahead to euro area inflation data due later this week for fresh guidance on the ECB’s policy trajectory.