Euro Heads for Biggest Monthly Loss Since July 2025

The euro is on track to experience its largest monthly loss in 2026 despite a brief rally on Wednesday. The currency rose against a basket of global currencies, attempting to recover from a 16-month low against the US dollar.

This recovery was short-lived as investors' expectations for a Federal Reserve interest rate hike in October declined, leading to a stall in the US currency's rally. As a result, the euro is down around 2.25% against the US dollar so far in September.

The widening interest rate differential between Europe and the United States has increased the relative attractiveness of the US dollar over the euro. The European Central Bank President Christine Lagarde stated that the energy shock was raising inflation expectations, although there were no signs yet of a material impact.