FX.co ★ Euro Nears $1.16 as ECB-Fed Policy Divergence Grows

The euro remained close to $1.16, reaching its highest point since November 2021. This movement reflects the widening gap in monetary policy approaches between the European Central Bank (ECB) and the US Federal Reserve. This development is set against a scenario of escalating oil prices, primarily due to concerns about supply interruptions linked to growing tensions between Israel and Iran, as well as the ongoing trade tariff disputes. In the Eurozone, market expectations currently position the ECB's deposit rate at 1.79% by the end of the year, with the likelihood of a September rate cut decreasing to 50% from a previous 60%. ECB member Joachim Nagel emphasized the necessity of policy adaptability, acknowledging the intricate global situation. In contrast, the Federal Reserve is broadly anticipated to maintain its current interest rates this Wednesday. Investors will be keenly observing the release of updated economic forecasts and the dot plot, as there remains speculation about a potential rate reduction in September.