Euro Dives Below $1.14 as Hawkish Fed Signals Further Rate Hikes
The euro has extended its decline below $1.14, reaching a fresh near two-month low as the US dollar strengthened following stronger-than-expected US PMI data and hawkish remarks from Federal Reserve policymakers.
This has reinforced expectations of further monetary tightening, which is weighing on risk-sensitive assets. The rebound in oil prices amid persistent uncertainty surrounding US-Iran talks is also contributing to this decline.
Despite the eurozone's private-sector activity expanding at its fastest pace in almost three-and-a-half years in September, as shown by stronger-than-expected PMI data, investors are digesting this information.
ECB official Joachim Nagel noted that oil prices are becoming an increasingly important factor in monetary-policy decisions and left the door open to further rate hikes. Chief Economist Philip Lane also warned that another surge in energy prices could keep eurozone inflation elevated for longer than expected.