EUR/USD Slumps Below 1.1600 as Fed Hike Odds Rise Amid Trade Tensions

The EUR/USD currency pair slipped below 1.1600 at the end of August as expectations for a US Federal Reserve rate hike rose and trade tensions between the US and Canada intensified. The pair had been trading above the 1.1350 monthly low but retreated from its peak of 1.1710.

The dollar's safe-haven appeal weakened in July after rate-hike expectations faded, but Fed Chair Kevin Warsh's remarks at Jackson Hole helped revive hawkish pricing. This led to a rise in the CME FedWatch-implied probability of a September hike to 45.7% from about 35%.

The renewed uncertainty was compounded by trade tensions between the US and Canada, with President Donald Trump imposing tariffs of around $20 billion on Canadian goods. The retaliatory tariffs matched this size, adding to market volatility.