Euro loses ground against dollar after new Fed signals

On Wednesday morning, September 23, the EUR/USD pair is trading in a narrow range of 1.1426-1.1450 dollars.

For comparison, the official ECB reference rate on September 21 was 1.1490 dollars per euro, meaning the European currency has noticeably weakened in recent days.

The main factor remains the monetary policy of the US Federal Reserve. Last week, the Fed raised the target range for the rate by 25 basis points to 3.75–4.00%. Moreover, recent statements by representatives of the US central bank point to lingering concerns about inflation. In particular, Richmond Fed President Tom Barkin said that inflationary pressure is already linked not only to energy and tariffs but also to sustained consumer demand.

Additional pressure on the euro came from remarks by Fed officials about the possibility of further rate hikes. As a result, the market is again pricing in a tighter trajectory for US monetary policy, which supports yields on dollar assets and the dollar itself.

For the euro, the situation is mixed. On the one hand, the ECB is also pursuing a tighter policy: on September 10, the deposit rate was raised to 2.50% amid an energy inflation shock. On the other hand, weaker business and consumer activity indicators in the eurozone limit the room for further tightening.

Another factor remains oil prices and geopolitics. The decline in oil prices in recent days somewhat supports the euro, as the eurozone is a major importer of energy resources. However, the ongoing tensions in the Middle East continue to create increased volatility in the currency market.