Euro Drops Below 1.1400 as Fed Rate Hike Expectations Strengthen Dollar

During Thursday's Asian trading session, EUR/USD extended its recent weakness, currently trading at 1.13742, after earlier touching around 1.1380. The dollar's broad strength, supported by hawkish signals from the Federal Reserve, is the core driver dragging the pair lower.

**Hawkish Fed Stance Dominates Market Sentiment**

Recent signals from the Federal Reserve indicate its resolve to combat inflation remains unshaken, reinforcing market expectations that interest rates will stay higher for longer. This stance directly boosted dollar buying. Meanwhile, market reports show the European Central Bank also has rate hike expectations, but the euro has failed to gain effective support from this, instead remaining under sustained pressure due to the relative resilience of US economic data, pushing EUR/USD toward multi-month lows.

**Key Levels and Short-Term Drivers**

From a technical perspective, after breaking below the 1.1400 level, short-term momentum in EUR/USD is clearly tilted toward the downside. Any upside surprise in US inflation data could further dampen market hopes for a Fed pivot to rate cuts, providing additional support for the dollar. Analysts note that the previous US CPI data exceeding expectations has already reinforced the Fed's stance on holding rates steady and exerted pressure on the euro. Against this backdrop, rebound attempts in EUR/USD have appeared feeble, with the pair currently testing support below.

**Key Focus Ahead**

Looking ahead, traders are closely monitoring upcoming US and European economic data and central bank officials' speeches to gauge the future policy paths of the two major central banks. Any new signs of a strong US economy or stubborn inflation could push the dollar higher, keeping EUR/USD under continued pressure. Market views suggest that under the current expectations of policy divergence, the euro is unlikely to reverse its relatively weak pattern in the short term.