Euro Rallies Against US Dollar as Post-Fed Rally Loses Steam

The Euro has gained against the US Dollar as the post-Fed rally loses momentum. The EUR/USD pair trades modestly higher on Thursday, up 0.24% on the day and hovering near levels last seen on July 31. The recovery comes as falling Oil prices pull US Treasury yields away from their recent highs, prompting the US Dollar to trim part of its post-Fed gains.

The Federal Reserve's monetary policy decision, which saw a 25 basis point rate hike to 3.75%-4.00%, delivered its first increase since 2023, led to the US Dollar strengthening sharply on Wednesday, climbing to a seven-week high as Treasury yields rose. However, expectations of additional Fed tightening limit the US Dollar's downside and keep the EUR/USD recovery capped.

The European Central Bank (ECB) officials warn of upside inflation risks, supporting expectations of more tightening. ECB Governing Council member Gabriel Makhlouf said 'Risks to inflation remain on the upside,' adding that policymakers 'can't rule out anything at future meetings.' The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 100.08 after touching an intraday high of 100.37.