Euro hits two-month high as Fed eyes rate cut

The euro climbed toward $1.18, its strongest level since early July, buoyed by broad dollar weakness as the US Federal Reserve prepares to resume interest rate cuts this week.

Markets widely expect the Fed to lower rates by at least 25 basis points on Wednesday, with policymakers weighing a cooling labor market against lingering inflationary pressures from tariffs.

In Europe, officials continue to stress vigilance on inflation. ECB Executive Board member Isabel Schnabel said monetary policy should “keep a steady hand,” warning that upside risks—ranging from tariffs and services inflation to food prices and fiscal policy—remain significant.

Slovak central-bank Governor Peter Kazimir echoed the concern, cautioning that overlooking these risks “would be a mistake.”

The ECB last week kept borrowing costs unchanged for a second straight meeting, signaling that its rate-cutting cycle may have come to an end.