FX.co ★ Euro Hits Two-Month High as Fed Eyes Rate Cut

The euro advanced toward $1.18, marking its highest level since early July, driven by broad dollar weakness as the US Federal Reserve is set to implement interest rate cuts this week. Market consensus suggests the Fed will reduce rates by at least 25 basis points on Wednesday, as policymakers weigh the impact of a cooling labor market against persistent inflationary pressures stemming from tariffs. Meanwhile, in Europe, vigilance on inflation remains a focal point for officials. ECB Executive Board member Isabel Schnabel emphasized that monetary policy should maintain a "steady hand," cautioning that significant upside risks persist, including those related to tariffs, services inflation, food prices, and fiscal policy. Slovak central-bank Governor Peter Kazimir echoed this sentiment, warning that ignoring these risks "would be a mistake." Last week, the ECB maintained its borrowing rates for the second consecutive meeting, suggesting that its rate-cutting cycle might have concluded.