EUR/USD Tumbles as Rate Differentials and Oil Prices Weigh on Euro

The euro has started the final week of September on the back foot, with EUR/USD trading at 1.1377, down 0.13% from the prior session.

This decline comes after a cumulative loss of 0.80% over the past seven sessions, 1.80% over the past month, and 3.01% over the past twelve months.

The policy gap between the Federal Reserve and the European Central Bank is a key reason for the euro's weakness, with the Fed raising rates by 25 basis points on September 16 to lift its target range to 3.75%-4.00%, while the ECB raised its three key rates by 25 basis points six days earlier.

The rate differential between the two central banks has widened to 150 basis points, and money markets now price at least one more 25-basis-point ECB hike by year-end with a 40% probability of a second.