Euro holds near mid-1.1500s, highest level since June 17 as receding Fed hike bets hit USD

The EUR/USD pair builds on last week's breakout momentum above the 1.1460-1.1470 horizontal barrier and attracts buyers for the fifth straight day on Monday. Spot prices climb to a fresh high since June 17, beyond mid-1.1500s during the Asian session and seem poised to appreciate further amid a broadly weaker US Dollar (USD).

In fact, the USD Index (DXY), with tracks the Greenback against a basket of currencies, prolongs last week's retracement slide from the vicinity of the year-to-date as a slump in crude oil prices force traders to temper bets on extreme Fed tightening. US President Donald Trump said that he will order American forces to hold off on new strikes against Iran, claiming Mideast allies have reached the parameters of a deal to end the 5-month-old war. This, along with the OPEC+ decision on Sunday to increase production in September, is seen weighing heavily on crude oil prices.

Brown Brothers Harriman’s Elias Haddad argues that the recent strength in the Dollar is losing momentum, with the bank now judging that “the USD rally from May has run its course, with DXY poised to retreat back into a 96.00-100.00 range.” BBH contends that the earlier “tailwind to USD from resilient US economic activity” is increasingly being offset by policy concerns, specifically that “Fed Chair Kevin Warsh failure to turn tough inflation rhetoric into a credible policy” is “increasing the risk the Fed falls behind the curve in containing inflation.”

Apart from this, aggressive follow-through short-covering in the Japanese Yen (JPY) turns out to be another factor undermining the USD. The Euro, on the other hand, continues to draw support from resilient Eurozone inflation data, which backs the case for the European Central Bank (ECB) to raise interest rates again in September. This, in turn, validates the near-term positive outlook for the EUR/USD pair as traders now look forward to important US macro releases scheduled at the beginning of a new month, starting with the ISM Manufacturing PMI later this Monday, for fresh impetus.

Societe Generale’s Sam Cartwright argues that the latest inflation figures, taken together with the “solid 2Q26 GDP print,” strengthen the policy case for further tightening. In his view, “today’s release should support another ECB rate hike in September,” as resilient growth and slightly firmer price pressures give the central bank room to maintain a hawkish stance.