FX.co ★ Euro Remains Close to Three-Month Highs

The euro held just above $1.165 in the final full week of August, maintaining its highest level since mid-May, as investors positioned for a more hawkish European Central Bank against a backdrop of geopolitical tensions complicating the fight against inflation. The ECB is widely expected to raise interest rates in September, following its June tightening aimed at curbing price pressures linked to the US–Iran conflict and its effect on energy markets. Oil remains above $90 per barrel, amid mounting risks of further supply disruptions in refined fuels, critically low Eurozone gas inventories, and a conflict that could drag on beyond the US midterm elections in November. A September increase would lift the deposit rate to 2.5%, yet expectations for additional tightening are building. Markets now assign roughly a 25% probability that the deposit rate will reach 3% by March 2027 and about a 60% probability of that level being hit by September.