Fed Hawkishness Sinks Euro to One-Year Lows Amid Rate Hike

The Euro has slumped to one-and-a-half-month lows against the US Dollar, as investors react to the Federal Reserve's hawkish rate hike. The Fed increased interest rates by a quarter-point for the first time in three years on Wednesday, meeting market expectations.

However, it was Chairman Kevin Warsh's comments that caught markets off guard. He stated that 'inflation remains elevated' and that 'the economy appears to be strengthening,' indicating that further rate hikes are likely in the pipeline.

This shift in tone has boosted confidence in the central bank's independence and sent the US Dollar rallying against its main peers, including the Euro.

The Eurozone's Harmonized Index of Consumer Prices (HICP) also showed a 0.4% pace of price growth in August, exceeding expectations.