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2025-09-16 23:18:57
Euro hits four-year high as traders brace for a Fed rate cut. The euro hit a four-year high as traders braced for a Federal Reserve rate cut this week, which would deepen the policy divergence between the Fed and the European Central Bank. On Tuesday, the euro rose to its highest level against the dollar since September 2021, rising as much as 0.7% to 1.1847. Since 2025, the euro has risen about 14% against the dollar, and is expected to have its best nine-month performance on record. Markets expect the Federal Reserve to cut interest rates by three quarter-points each by the end of the year, while the ECB is not expected to cut further, which would narrow the gap between the two central banks' key rates. Options markets suggest this could pave the way for the euro to move towards the closely watched 1.20 level. Rate hikes are generally bullish for a currency. While the US favors easing due to a cooling labor market, European defense and infrastructure spending are expected to boost growth and inflation, keeping the ECB on hold—and potentially even forcing a rate hike.
