FX.co ★ Euro Hits Four-Year High

The euro has surpassed the $1.18 mark for the first time since July, reaching its highest level since September 2021. This appreciation is attributed to unexpectedly positive investor sentiment within the Eurozone and Germany, coupled with a widespread weakening of the dollar as the US Federal Reserve gears up to resume interest rate reductions this week. Market consensus suggests that the Fed will decrease rates by at least 25 basis points, as policymakers balance a cooling labor market against ongoing inflationary pressures stemming from tariffs. In contrast, European authorities continue to stress vigilance concerning inflation. Isabel Schnabel, a member of the ECB Executive Board, has advocated for a cautious approach, advising that risks such as tariffs, service sector inflation, food prices, and fiscal policies remain substantial. Echoing this sentiment, Slovak central bank Governor Peter Kazimir warned that overlooking these risks would be a misstep. The European Central Bank, in its latest decision, opted to maintain borrowing costs unchanged for the second consecutive meeting, indicating that its cycle of rate cuts may have concluded.