Euro Struggles as Fed Hike Widens Policy Divide

The Euro-US Dollar (EUR/USD) pair has been under pressure as the Federal Reserve's latest interest-rate hike strengthens the US dollar and highlights the growing difference between US and Eurozone monetary policy.

The Fed raised its target range by 0.25 percentage points to 3.75%-4.00% last week, signaling another increase could follow before the end of the year, giving the dollar renewed support.

The euro faces a more complicated backdrop due to elevated inflation risks across the Eurozone, particularly with higher energy prices linked to Middle East tensions increasing costs for households and businesses.

However, these same pressures can also hurt economic growth, leaving the European Central Bank (ECB) with a difficult balance between keeping inflation under control and avoiding unnecessary pressure on an already fragile economy.