Euro Sinks Below July Lows as US Rate Expectations Fuel Dollar Rally
The EUR/USD pair has lost almost all of its August gains, falling to its lowest level since late July as the US dollar strengthened on firmer rate expectations. The euro rose from around 1.1350 in late July to just above 1.1700 in mid-August before slipping below 1.1450 on Tuesday.
The European Central Bank's (ECB) decision to lift its deposit rate to 2.50% on September 10 has fueled expectations of further tightening, with futures pricing implying three or four more moves over the next year.
However, ECB officials have pushed back against the degree of tightening priced by markets, suggesting a more measured approach.
The latest economic data supports this softer stance, with Eurozone consumer confidence falling to -16.5 and business activity weakening.