FX.co ★ Euro Slides as Dollar Holds Firm Ahead of Fed Decision

The euro slipped toward $1.15, briefly touching its weakest level since mid-August, as the dollar held firm ahead of a widely expected Federal Reserve rate hike on Wednesday. Market sentiment was further undermined by rising oil prices, driven by the escalating war in the Gulf.

Inflationary pressures remain elevated after six months of US-Israeli conflict with Iran pushed crude prices well above $100 a barrel, clouding the outlook for monetary policy and sparking intermittent sell-offs in long-dated government bonds.

The European Central Bank raised interest rates last week and signaled that additional tightening may follow, leading markets to price in four more ECB rate increases by mid-2027.

Investors now turn their focus to a pivotal week for central banks: the Fed’s decision on Wednesday, the Bank of England on Thursday, and a widely anticipated rate hike by the Bank of Japan on Friday. The BoE is expected to keep rates on hold, though the decision is likely to be finely balanced.