Euro Falls Despite Report of European Interest Rate Hike

The euro fell in the European market on Wednesday against a basket of global currencies, resuming losses that had temporarily halted yesterday against the U.S. dollar, moving again away from three‑month highs, despite a Reuters report that the European Central Bank is preparing to raise interest rates in September.

This rise comes as long‑term U.S. Treasury yields rebound, ahead of the release of important U.S. data that will provide further decisive evidence on the likelihood of the Federal Reserve raising rates this year.

The European Central Bank, according to three Reuters sources, indicated that ECB policymakers are ready to raise rates at their next September meeting to contain the spill‑over effects of the Iranian war, but they do not wish to signal further tightening thereafter.

The sources, who spoke on condition of anonymity due to the sensitivity of the matter, explained that with inflation approaching 3%, ongoing Iranian conflict, and the euro‑area economy showing resilience, ECB governors believe it is time to raise the main policy rate again, from 2.25% to 2.50%.

The sources added that the rate hike, which was included in the ECB's June economic forecasts, suggests the central bank's determination to avoid a repeat of the sharp inflation wave that followed Russia's invasion of Ukraine in 2022.

Forecasts for the euro's performance are presented here on the "FX News Tody" site: continued negative movement of the euro against the U.S. dollar, with increased buying of the U.S. currency as a safe haven due to renewed concerns over military tensions in the Middle East.