FX.co ★ Euro Falls on Data, Middle East Risks

The euro weakened to $1.144 on Thursday as investors weighed a mix of fresh economic data, rising tensions in the Middle East, and ongoing uncertainty over the US interest rate outlook after a split Federal Reserve decision. Spain’s annual EU-harmonized inflation rate accelerated more than expected to 3.8% in July, its highest level since May 2024 and well above the European Central Bank’s 2% target. In contrast, France’s economy returned to growth, expanding 0.2% in the second quarter after contracting in the previous three months, while GDP growth in Spain and the Netherlands picked up to 0.7% and 0.4%, respectively, both beating forecasts. At the same time, renewed US airstrikes on Iran in response to attacks on American forces across the Middle East pushed oil prices higher and dampened risk appetite. Adding to the uncertainty, the Federal Reserve kept interest rates on hold on Wednesday, with three FOMC members dissenting in favor of an increase.