Euro hovers at $1.16

The euro traded around $1.16 in mid-August, holding just below last month’s peak — the highest level since 2021 — as investors assessed a complex mix of economic, political, and monetary developments.

Currency markets are bracing for Friday’s high-profile meeting between U.S. President Donald Trump and Russian President Vladimir Putin, which is aimed at seeking a resolution to the conflict in Ukraine. Ukrainian President Volodymyr Zelenskyy is reportedly not expected to participate, a factor that could influence both the tone and potential outcomes of the talks.

In the U.S., expectations for imminent Federal Reserve rate cuts have strengthened following a run of softer economic data, including weaker-than-forecast nonfarm payrolls and a decline in the ISM Services PMI. Such developments have fueled speculation that the Fed could ease policy as early as September, which would typically put downward pressure on the dollar and support the euro.

Meanwhile, the European Central Bank brought its year-long easing cycle to an end in July after delivering eight consecutive cuts that pushed borrowing costs to their lowest level since November 2022. Still, some market participants are keeping the door open for at least one more rate reduction before year-end if economic conditions weaken further.

On the data front, euro area GDP in the second quarter posted a modest 0.1% increase, while inflation held steady at the ECB’s 2% target in July, suggesting price stability but limited growth momentum.

However, risks remain tilted to the downside. The European Union is facing newly implemented 15% tariffs on most goods exported to the U.S., a move expected to weigh on trade volumes and corporate profitability in the months ahead.

Combined with political uncertainty surrounding U.S.–Russia relations and lingering geopolitical tensions, these factors could keep the euro’s near-term trajectory volatile, even as rate differentials start to favor the single currency.