The Euro pares gains against the Dollar as Fed rate hike bets fade and Middle East tensions support safe-haven demand.
EUR/USD retreated to 1.1580 after hitting an intraday peak of 1.1614, its highest since June 17, as the US Dollar found footing. The shift follows cooling expectations for a September Fed rate hike, with markets pricing a 70% chance of unchanged rates next month.
Recent US data showed softer labor demand, consumer spending, and inflation, reducing pressure on the Fed to tighten further. Meanwhile, the European Central Bank is expected to raise rates again in September to combat persistent inflation. The US Dollar Index recovered to 99.57 after dipping to 99.30, its lowest since early June.
Geopolitical risks, including the expiration of a US-Iran agreement and restricted shipping in the Strait, continue to support defensive demand for the Dollar, capping its downside.