Euro Holds Near Two-Month Low as Fed, ECB Rate Bets Rise

The euro traded just below $1.15, remaining close to its weakest level since late July, as the dollar strengthened after the Federal Reserve raised interest rates yesterday and signaled another hike later this year. US policymakers voted unanimously to lift the benchmark federal funds rate to a range of 3.75% to 4% on Wednesday, the first increase since July 2023, as they seek to contain rising inflation. Updated FOMC projections also showed that a strong majority of officials see another hike as possible later this year. Meanwhile, investors have increased bets on further European Central Bank rate hikes amid renewed inflation concerns. Markets are now pricing the ECB deposit rate at around 2.9% by December, up from the current 2.5%. The ECB raised rates last week for the second time this year to contain an energy-driven rise in inflation, while warning that price pressures could prove persistent, reinforcing expectations for further tightening.