23.09.202608:22:11UTC+00Euro Weakens as Rate-Hike Expectations Ease

The euro weakened toward $1.14, touching its lowest level since July 29, as falling oil prices led traders to scale back expectations for further ECB rate hikes, while the US dollar remained underpinned by expectations of additional Federal Reserve tightening. Brent crude fell below $100 a barrel amid signs of progress in US–Iran talks and ongoing efforts to restore operations at a key Saudi Arabian pipeline.

ECB official Joachim Nagel noted that oil prices are becoming an increasingly important consideration for policymakers and kept the option of further rate increases open, citing still-elevated core inflation, though he said he has not yet observed significant second-round effects. At the same time, ECB Chief Economist Philip Lane warned that another spike in energy prices could keep eurozone inflation higher for longer than previously anticipated.

Meanwhile, stronger-than-expected flash PMI data showed that eurozone private-sector activity expanded in September at its fastest pace in almost three and a half years.