The euro traded around $1.18, slightly below the four-year highs reached earlier in the week, as the dollar firmed following the Fed’s policy decision. The Fed cut the funds rate by 25 bps, as expected, and signaled an additional 50 bps of reductions by year-end. However, Chair Powell emphasized that the move was a ‘risk management’ cut rather than the start of a new easing cycle. In Europe, the ECB left rates unchanged for a second consecutive meeting last week, suggesting its rate-cutting cycle may be over. Policymakers continued to stress caution: Executive board member Isabel Schnabel urged policymakers to “keep a steady hand,” citing risks from tariffs, services inflation, food prices, and fiscal policy. Slovak central bank governor Peter Kazimir echoed the warning, saying it would be “a mistake” to downplay these risks. Inflation in the Euro Area eased to 2.0% in August 2025, slightly below the preliminary estimate of 2.1%.