Euro Surges as Traders Shrug Off Hawkish Fed Minutes

The euro strengthened sharply against the dollar during the North American session on Wednesday, gaining more than 0.85% in a single day, completely ignoring the hawkish signals revealed in the Federal Reserve's June meeting minutes released at the same time. The minutes showed that some participating officials and three dissenters believed that further rate hikes might be necessary if the inflation slowdown process stalls. However, the market reaction was muted, the dollar failed to gain support, and the common currency took advantage to climb strongly.

**Why did the hawkish minutes fail to boost the dollar?**

The tone of the Fed's meeting minutes was widely viewed by the market as leaning "hawkish," with several policymakers explicitly mentioning the possibility of resuming rate hikes. But the dollar did not strengthen as a result; instead, it came under pressure after the minutes were released. Analysts noted that the market may have already priced in part of the hawkish expectations, and doubts about the Fed's future policy path remain. The minutes also revealed internal divisions—although the vote was unanimous in action, officials' projections for future rate direction were almost split down the middle, which weakened the coherence of the hawkish signal and disappointed dollar bulls.

**Stabilization expectations for the eurozone economy provide support**

Positive factors for the euro itself also underpinned the rally. A series of recent data suggests that the eurozone economy appears to be stabilizing after the shock. Nobile, chief Italy economist at Oxford Economics, noted in a report that although the underlying growth momentum remains moderate, the worst period seems to be over, and economic performance is even slightly better than expectations at the peak of the conflict. This assessment of marginal improvement in the economic outlook has built support for the euro's exchange rate, allowing it to maintain resilience under external pressure.

**Market focus shifts to policy divergence prospects**

The market is currently reassessing the policy pace of major Western central banks. The European Central Bank already raised rates by 25 basis points in June, lifting the main deposit rate to 2.25%, and its subsequent policy direction is closely watched. The market will pay close attention to the upcoming release of the ECB's meeting minutes for more clues on the future rate path. With the Fed's hawkish stance facing internal challenges while the ECB may maintain tightening, expectations of policy divergence could continue to provide upward momentum for the euro against the dollar.