Euro Slides Toward Monthly Lows as Hawkish Fed Bets Strengthen US Dollar

The Euro weakened further against the US Dollar on Friday, with the EUR/USD pair falling toward its lowest level in nearly a month as investors increased bets that the Federal Reserve will maintain a hawkish stance amid persistent inflation pressures and rising energy costs.

EUR/USD traded around 1.1626 during late-session activity, remaining on track for a weekly loss as the stronger US Dollar and surging Treasury yields continued to pressure major global currencies.



Market sentiment shifted further in favor of the Greenback after recent US economic data showed inflation accelerating for a second straight month in April while consumer spending remained resilient despite elevated borrowing costs. The data reinforced expectations that the Federal Reserve may keep interest rates higher for longer to contain inflation risks linked to rising oil prices and supply disruptions in the Middle East.



Traders are also increasingly pricing in the possibility of another Fed rate hike before the end of the year. According to market expectations reflected in futures pricing, investors now see nearly even odds of a rate increase at the Fed’s December meeting. The shift in expectations boosted the US Dollar Index above the 99.00 level, marking its strongest reading since early April, while the benchmark 10-year US Treasury yield climbed to its highest level in nearly a year.



At the same time, inflationary pressures are also intensifying across the Eurozone as higher energy prices ripple through the regional economy. Investors now expect the European Central Bank to deliver at least two additional interest rate hikes this year, with markets fully pricing in a move at the June meeting.


However, policymakers in Europe face growing concerns over slowing economic growth as surging energy costs threaten industrial activity and consumer demand across the bloc.

Geopolitical tensions also remain firmly in focus after negotiations between the United States and Iran over Tehran’s nuclear program showed little sign of progress. While a fragile ceasefire continues to hold, the ongoing blockade around the Strait of Hormuz has kept oil prices elevated and added further uncertainty to the global inflation outlook.


Iranian Foreign Minister Abbas Araghchi accused Washington of sending “contradictory messages” during negotiations, while US President Donald Trump stated that he could support a long-term suspension of Iran’s nuclear program if Tehran made credible commitments. Trump also warned that military strikes could resume if diplomatic efforts collapse.


The broader market backdrop continues to favor the US Dollar as investors seek safety amid geopolitical risks, elevated energy prices, and expectations of tighter monetary policy from the Federal Reserve.