11.09.202609:04:44UTC+00Euro Slips as Dollar Holds Firm Ahead of US CPI

The euro slipped to around $1.16 on Friday as the dollar held firm ahead of key US CPI data due later in the day. At the same time, investors continued to digest the European Central Bank’s latest policy decision and the prospects for further interest rate increases.

On Thursday, the ECB raised its key interest rates by 25 basis points and warned that inflation is likely to remain well above its 2% target for an extended period. ECB President Christine Lagarde called the move a “no-brainer” and cautioned that the projected return of inflation to target by the end of 2027 could be pushed back even further.

The inflation outlook has deteriorated so sharply that additional monetary tightening is now seen as increasingly likely, according to people familiar with the discussions, with another rate hike possible as early as October. Money markets are currently pricing in three more ECB rate increases by March next year, followed by a fourth hike by June.