The euro traded near $1.18, a slight decrease from earlier in the week, as the dollar gained strength after the Federal Reserve’s recent policy announcement. The Fed reduced the funds rate by 25 basis points, and indicated the possibility of further reductions. Meanwhile, the ECB has maintained steady rates, suggesting a pause in its easing cycle.
- 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.
- The Fed signaled an additional 50 bps of reductions by year-end.
- Chair Powell emphasized the move was a ‘risk management’ cut.
- The ECB left rates unchanged for a second consecutive meeting.
- Isabel Schnabel urged policymakers to “keep a steady hand.”
- Peter Kazimir said it would be “a mistake” to downplay risks.
- Inflation in the Euro Area eased to 2.0% in August 2025.
The euro’s performance appears to be influenced by contrasting monetary policy signals from the US and Europe. While the US is leaning towards further easing, the Euro Area seems hesitant, focusing on potential risks to the economy. This divergence puts downward pressure on the euro as the dollar becomes relatively more attractive. Concerns about inflation and broader economic risks are also contributing to a cautious outlook for the Euro.