Euro Nears 2-Month High

The euro has been trading around $1.15 in August, near two-month highs, as traders navigate shifting developments in the Middle East and conflicting signals over the prospects of a deal between the US and Iran, while also assessing the resulting rise in oil prices and its impact on inflation.

In Europe, market-based measures of inflation expectations, reflected in swaps for the Euro Area over the next year, are around 2.4%, above the ECB’s 2% target.

Eurozone inflation edged up to 2.9% in July.

Meanwhile, the Euro Area economic outlook has improved, with recent resilience prompting analysts to become more optimistic about growth.

The Eurozone economy expanded 0.4% in Q2, the strongest pace since early 2025 and growth is projected to moderate in the near term before gradually gaining momentum.

As a result, investors expect the ECB to deliver another 25bps rate hike in September.