Euro softens below 1.1600 as markets price in Fed rate hike
The EUR/USD pair declines to near 1.1585 during the early Asian session on Monday. The pair extends the decline amid aggressive Federal Reserve (Fed) rate-hike bets following hotter US inflation reports. Traders brace for the Fed interest rate decision later on Wednesday.
The EUR/USD exchange rate slipped below 1.1600 on Monday as markets anticipated a Federal Reserve (Fed) interest rate hike. This came after US inflation data showed a stronger Consumer Price Index (CPI) in August. The rise in inflation strengthened expectations of a rate increase at the Fed meeting next week. The US CPI rose by 0.4% month-over-month in August, with the 12-month increase at 3.4%, matching market expectations.
The core CPI also increased by 0.3% monthly, surpassing forecasts. Financial markets have priced in a 91% chance of a quarter-point rate hike at the Fed's September meeting, up from 72% prior to the US PPI data, according to the CME FedWatch tool. ECB President Christine Lagarde's hawkish communication and subsequent statements have pushed markets to expect nearly 40 basis points of additional tightening by year-end, reinforcing the perception that the ECB remains focused on inflation risks.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
Also reported by 4 other outlets
- United States Dollar Index rises to near 99.50 as Fed rate hike bets increase fxstreet.com
- Gold slips as hotter US inflation lifts Fed hike bets, oil stokes price pressures investing.com
- After oil surge, Fed rate hike will shape challenge indianexpress.com
- Live: Wall Street rises despite hot inflation likely to trigger a Fed rate hike this week abc.net.au
