Euro slips to lowest since mid-June amid mixed data and Fed focus

The euro extended losses below $1.15, hitting its weakest level since mid-June, as investors digested a slew of economic data and shifted focus to the Federal Reserve’s upcoming policy decision on Wednesday.

Fresh figures from Eurostat revealed that the Eurozone economy expanded by just 0.1% in the second quarter, a sharp deceleration from the 0.6% growth seen in Q1. While the result modestly exceeded expectations of flat growth, it underscored persistent weakness in the region’s economic momentum, weighed down by subdued domestic demand and weak industrial output.

At the same time, the US dollar gained ground, buoyed by stronger-than-expected Q2 GDP data and robust July private payrolls, which reinforced market expectations that the Fed may remain hawkish for longer.

This widening divergence in economic performance and policy outlook between the US and the Eurozone added further downward pressure on the common currency.

Investor sentiment was also dampened by concerns over the recently announced U.S.-EU trade agreement, which many analysts view as skewed in favor of American exporters. The deal, while aiming to de-escalate trade tensions, is seen as offering limited near-term relief to the eurozone’s struggling external sector.

Meanwhile, the outlook for European Central Bank monetary policy remains dovish. Although the ECB has maintained a cautious tone, markets have now priced in a 90% probability of a 25-basis-point rate cut by March 2026.

The odds of a cut as early as December this year have fallen to just 30%, as policymakers remain wary of reigniting inflationary pressures amid ongoing geopolitical uncertainties and fiscal fragmentation across member states.

Altogether, the euro’s trajectory reflects a complex mix of macroeconomic underperformance, shifting policy expectations, and structural imbalances within the bloc’s economy.