The euro climbed 0.3% to $1.1198 on Tuesday but stayed near its lowest levels since May 2025. The U.S. dollar index slipped as traders waited for U.S. inflation data due Wednesday.
The euro rose against the dollar on Tuesday, yet it remained near its lowest levels since May 2025. The U.S. dollar index, which tracks the greenback against six major peers, shed 0.4% to 102.20 but still sits near an 18-month high.
France weighs on the euro
Investors worry about France's projected 5.4% budget deficit and a political deadlock ahead of the 2027 presidential election. According to the source, that anxiety continues to cast a long shadow over European assets.
French 10-year OAT yields were stalling near 4.88%. Wide spreads over German Bunds keep an elevated risk premium embedded in the single currency. Meanwhile, money markets expect the European Central Bank to keep a cautious policy stance, so the euro lacks the yield backing it needs to break out of its multi-month downtrend.
Williams still expects one more Fed hike
Currency traders now focus on the U.S. consumer price index report on Wednesday and the producer price index report on Thursday. The releases follow recent data that recalibrated Fed rate hike expectations for October.
New York Fed President John Williams still expects one more rate hike this year but sees no need for further increases in 2027, citing underlying disinflationary forces. Collin Martin of the Schwab Center for Financial Research said there is a 20% implied probability of a hike at this month's meeting, so a very strong CPI print would likely be needed to shift the odds.
U.S. Treasury yields extended their retreat from last week, and the benchmark 10-year yield dipped 3.9 basis points to 5.209%.
Source: Investing.com
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