Euro Weakens on Rising Inflation Expectations

The euro slipped below $1.16 as investors digested the latest inflation data from the Eurozone.

The data showed annual inflation rose to 3.3% in August, its highest level since September 2023 and above the ECB's 2% target.

Energy prices surged amid continued fighting in the Middle East, driving the increase.

Markets now price a deposit rate of around 2.70% by December, implying an 80% probability of a second hike after an expected September move.

ECB policymaker Olli Rehn warned that prolonged conflict could keep inflation elevated, while Martin Kocher said rising inflation risks may require a swift rate hike if confirmed in the ECB's next forecasts.