The euro advanced to around $1.160, its strongest level in two months, as shifting interest-rate expectations continued to underpin the single currency. Markets have scaled back wagers on a Federal Reserve rate hike this year, with recent economic data reinforcing the view that the Fed is likely to leave rates unchanged at its next meeting.
In contrast, investors now assign roughly an 84% probability to a 25-basis-point rate increase by the European Central Bank in September, underscoring the growing divergence in policy expectations between the two central banks.
Elevated energy prices remain a key headwind for the Euro Area, particularly as tensions in the Middle East show little sign of easing. Iran has urged the United States to accept defeat, while President Donald Trump has cautioned that Americans should brace for persistently high fuel costs as the conflict drags on.
Looking ahead, investors will closely monitor upcoming Eurozone PMI releases for further insight into the region’s economic momentum and the ECB’s policy trajectory.
