Euro Falls to Three-Month Low on Lagarde's Remarks
The euro weakened toward $1.135, its lowest level since June 26, as investors weighed comments from ECB President Christine Lagarde while the US dollar remained supported by fading optimism over US-Iran talks and growing expectations of further Federal Reserve rate hikes. Lagarde said the inflation outlook for 2027 and 2028 is now higher than policymakers expected a few months ago, mainly due to higher energy prices, but noted there is no evidence yet of energy costs feeding into higher wages. She added that while the shock is too significant to ignore, a measured policy response remains appropriate to keep inflation under control. Money markets are pricing in roughly 100 basis points of ECB rate hikes by the end of 2027. In the US, hawkish Fed commentary, alongside data pointing to resilient economic growth and a firm labor market, has reinforced expectations for tighter monetary policy and sent the dollar to two-month highs.
135, its lowest level since June 26, as investors weighed comments from ECB President Christine Lagarde while the US dollar remained supported by fading optimism over US-Iran talks and growing expectations of further Federal Reserve rate hikes. Lagarde said the inflation outlook for 2027 and 2028 is now higher than policymakers expected a few months ago, mainly due to higher energy prices, but noted there is no evidence yet of energy costs feeding into higher wages. She added that while the shock is too significant to ignore, a measured policy response remains appropriate to keep inflation under control.
Money markets are pricing in roughly 100 basis points of ECB rate hikes by the end of 2027. In the US, hawkish Fed commentary, alongside data pointing to resilient economic growth and a firm labor market, has reinforced expectations for tighter monetary policy and sent the dollar to two-month highs.