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Euro hovers near two-month low as hawkish Fed outlook supports dollar

EUR/USD traded around 1.1372, while the dollar index rose to about 101.27 after reaching 101.35, its highest since July 29.

Reported · Written up by our desk · Major Pairs

The euro stayed near a two-month low as markets priced in a potentially hawkish Federal Reserve, leaving the US dollar supported. FXStreet said EUR/USD hovered around 1.1372 and remained under pressure for a fourth straight day.

The broader dollar strength was reflected in the US Dollar Index, which traded near 101.27 after an intraday high of 101.35, the highest level since July 29. Expectations for another Fed rate hike in October have grown, with the CME FedWatch Tool placing the probability at about 65%, up from 55% a week ago.

US data and Fed commentary helped reinforce the shift. FXStreet cited strong Wednesday PMI data and hawkish remarks, while Thursday’s Initial Jobless Claims rose to 197K from 196K, still below the 201K expected.

Higher interest-rate expectations and inflation concerns tied to elevated oil pushed Treasury yields higher, with the 10-year note around 5.10% after touching 5.15%, its highest since 2007. In Europe, stronger-than-expected German Ifo data offered some support for the euro, but FXStreet noted that broad dollar strength limited the move as markets anticipate further European Central Bank rate hikes.

Latest closeEUR/USD 1.138 ▼0.6%|Dollar index 101.29 ▲0.2%

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