Euro under double pressure ahead of Fed decision

At the beginning of the new week, the euro on FOREX remains under pressure from the American currency. On Monday morning, September 14, the EUR/USD pair dropped from 1.1598 to 1.1562 dollars. The market remains very sensitive to central bank decisions and the situation on the energy market.

The main event of the upcoming week will be the meeting of the US Federal Reserve System. After the publication of August inflation, expectations of a Fed rate hike sharply intensified. Additional support for the dollar came from a strong labor market report: American employers created 162 thousand jobs in August against significantly lower expectations.

For the euro, this is a negative factor: if the Fed indeed continues to tighten monetary policy, the difference between the yields of American and European assets may increase in favor of the dollar.

Meanwhile, the situation in the eurozone looks mixed. The ECB raised interest rates last week and signaled the possibility of further policy tightening. This became a supporting factor for the euro, but at the same time the high cost of energy creates serious risks for the European economy.

Particular attention is now drawn to oil. Amid the aggravation of the situation in the Middle East, the cost of Brent rose to about 107–108 dollars per barrel. For the eurozone, expensive oil is a negative factor: it increases inflationary risks and at the same time worsens the region's trade balance.

Thus, a rather complex picture is emerging for the euro. On the one hand, the ECB's tighter policy supports the European currency. On the other hand, the strong dollar, high American inflation, and rising oil prices limit the potential of EUR/USD.