Euro Hits Highest Level Since June 17 as Oil Prices Weaken USD

The Euro has been gaining strength for the fifth consecutive day, reaching its highest level since June 17 as investors bet against a Federal Reserve interest rate hike. The US Dollar Index (DXY) has retreated from its year-to-date high due to lower crude oil prices and decreased inflation fears. This shift in market sentiment has also led to increased demand for the Japanese Yen, which is seeing aggressive short-covering.

According to Brown Brothers Harriman's Elias Haddad, the USD rally that began in May may be losing momentum, with DXY poised to fall back into a 96.00-100.00 range. The bank attributes this shift to policy concerns and the failure of Fed Chair Kevin Warsh to turn tough inflation rhetoric into a credible policy.

Meanwhile, Société Generale's Sam Cartwright sees the latest inflation figures as supporting another European Central Bank (ECB) rate hike in September. He points to solid 2Q26 GDP growth and slightly firmer price pressures as giving the central bank room to maintain a hawkish stance.