The euro fell in European trading on Monday against a basket of global currencies, deepening its losses for the third consecutive day against the US dollar and hitting a four-week low, due to US pressures related to the rise of the world's largest currency and the increase in long-term Treasury bond yields ahead of the Federal Reserve meeting.
Reports indicate that the European Central Bank is considering raising interest rates for the second time in a row at its next October meeting, amid rising inflationary pressures stemming from higher oil and natural gas prices, and escalating geopolitical tensions in the Middle East.
Price overview
Euro exchange rate today: The euro fell against the dollar by more than 0.3% to ($1.1558), its lowest level since August 14, from today's opening price of ($1.1595), and recorded a high of ($1.1598).
The euro ended Friday's trading down 0.1% against the dollar, its second consecutive daily loss, due to US pressure.
The euro lost about 0.15% against the dollar last week, its second weekly loss in the last three weeks, due to rising US Treasury yields.
US dollar
The dollar index rose 0.3% on Monday, hitting a two-week high of 99.40, reflecting the strengthening of the US currency against a basket of major and minor currencies.
The yield on 10-year US Treasury bonds rose 0.3% today, maintaining its gains for the sixth consecutive session and approaching a three-year high near the 5% mark, which provides further support for the US dollar exchange rate.
This development in the US bond market comes as global oil prices have risen to near their highest levels in four months, putting further inflationary pressure on monetary policymakers at the Federal Reserve.
The Federal Reserve meetings begin tomorrow, Tuesday, with monetary policy decisions to be issued on Wednesday, amid markets pricing in an 86% probability of a 25 basis point interest rate hike, the first rate increase since July 2023.
European Central Bank
Last week, the European Central Bank raised its main interest rates by 25 basis points to 2.65%, the highest level since March 2025, in the second increase in European interest rates this year.
The European Central Bank's decision came unanimously to counter renewed inflationary pressures stemming from the energy price shock and maritime shipping disruptions.
The European Central Bank has become more concerned about high inflation persisting for a longer period, with expectations that it will remain above its 2% target for an extended time.
European Central Bank President Christine Lagarde warned that the conflict in the Middle East continues to generate inflationary pressures, and that inflation is likely to remain above target for a longer period.
European interest rate
Sources at the European Central Bank: Further tightening of monetary policy is likely, and another interest rate hike could be discussed as early as October.
The money market's pricing of the likelihood of the European Central Bank raising European interest rates by about 25 basis points next October is currently stable below 50%.
In order to reprice those possibilities, investors are awaiting later today an important speech by European Central Bank President Christine Lagarde in a dialogue on the economy, Europe and resilience, in Vienna.
Euro performance forecast
Here at FX News Today, we expect the euro to continue its downward trend against the US dollar, with a strong possibility of hitting new multi-week lows. However, if Lagarde's comments prove more hawkish than anticipated by the markets, the euro's losses could halt, and it might begin to recover against a basket of global currencies.
