Euro Retreats Below 1.1600 as Fed Rate Hike Bets Surge

The Euro has retreated below 1.1600 against the US Dollar on Friday, as the hawkish hike by the European Central Bank fades in its impact. The EUR/USD pair trades at weekly lows near 1.1590 after reaching highs of 1.1650 earlier in the week.

Investors are awaiting the release of US Consumer Price Index data to support growing hopes that the Federal Reserve will hike interest rates next week. Futures markets now price a 67% chance of a quarter-point rate hike, up from 50% last week, according to the CME's FedWatch Tool.

The recent acceleration in producer prices has fueled bets on monetary tightening, with US Producer Price Index figures showing inflation at the factory gate rose to a 5.4% year-on-year pace in August, up from 4.8% in July.