FX.co ★ Euro Weighed by Dollar Strength and Trade Risks

The euro traded below $1.14, hovering near the one-year low reached in June, as investors weighed the ECB’s policy outlook and the latest PMI figures, while the dollar remained supported by geopolitical tensions in the Middle East and new US tariffs. The ECB left interest rates unchanged, as widely expected, but signaled that a rate hike in September is becoming increasingly likely.

Renewed inflation concerns and expectations of further tightening after the summer have been reinforced by rising energy costs, with oil prices approaching $100 per barrel and natural gas prices surging amid the US–Iran conflict. Several policymakers, including Bundesbank President Joachim Nagel, cautioned that inflation risks remain elevated and indicated that additional rate increases may still be necessary.

Meanwhile, a survey by S&P Global showed that business activity in the Eurozone returned to growth in July, exceeding market forecasts. On the trade front, the US imposed new tariffs on imports from 60 trading partners, including the EU. The European Commission stated that these measures were broadly consistent with the existing EU–US trade agreement.