Euro steadies near two-week low as oil spikes on risk aversion
The euro held little changed just below $1.16 near a two-week low amid risk aversion tied to renewed Middle East hostilities and their economic impact. Brent rose to fresh six-week highs; Eurozone inflation topped nearly three-year levels.
The euro remained little changed just below $1.16, hovering near a two-week low, as investors moved away from riskier assets amid concerns over the economic impact of the energy shock from renewed hostilities in the Middle East.
Brent crude climbed to fresh six-week highs as traders weighed persistent risks to supply against signs that oil was still reaching global markets.
Meanwhile, Eurozone inflation data released earlier this week showed price growth at its highest level in nearly three years, reinforcing expectations for further ECB tightening.
Money markets are now pricing in almost a 100% probability of a rate hike next week, with another increase by year-end also seen as likely.
ECB policymakers Olli Rehn and Martin Kocher warned that a prolonged conflict and rising inflation risks could warrant further tightening.
In the US, markets are pricing in a 66% probability of a September rate hike following hawkish remarks from Fed Chair Kevin Warsh and a renewed rise in oil prices.