FX.co ★ Euro Holds Near Two-Month Low as Fed, ECB Rate Bets Rise

The euro traded just below $1.15, hovering near its weakest level since late July, as the dollar strengthened following the Federal Reserve’s interest rate hike and guidance for another increase later this year. On Wednesday, US policymakers voted unanimously to raise the benchmark federal funds rate to a range of 3.75% to 4%, marking the first increase since July 2023 as they move to curb rising inflation. Updated FOMC projections indicated that a solid majority of officials consider another hike later this year to be likely.

At the same time, investors have ramped up bets on additional European Central Bank rate increases amid renewed inflation worries. Markets now expect the ECB deposit rate to reach around 2.9% by December, up from the current 2.5%. The ECB raised rates last week for the second time this year to counter an energy-driven surge in inflation and warned that price pressures could remain stubborn, reinforcing expectations of further policy tightening.