The euro traded slightly below recent four-year highs, around $1.18, as the dollar strengthened in response to the Federal Reserve’s policy decision. While the Fed cut rates and signaled further reductions, caution from Chair Powell and persistent economic uncertainties in Europe contributed to the euro’s movement.
- The euro traded around $1.18, slightly below four-year highs.
- The dollar firmed following the Fed’s policy decision.
- The Fed cut the funds rate by 25 bps and signaled an additional 50 bps of reductions by year-end.
- Chair Powell emphasized the move was a ‘risk management’ cut rather than the start of a new easing cycle.
- The ECB left rates unchanged for a second consecutive meeting.
- ECB policymakers continued to stress caution regarding risks from tariffs, services inflation, food prices, and fiscal policy.
- Inflation in the Euro Area eased to 2.0% in August 2025, slightly below the preliminary estimate of 2.1%.
The asset’s movement appears influenced by both US and European monetary policy signals. A more hawkish stance from the US Federal Reserve relative to the European Central Bank, along with ongoing concerns about various economic risks within the Euro Area, is putting downward pressure on the asset’s value. The asset’s future performance will likely be tied to the evolving perspectives and actions of these central banks.