The euro held above $1.15, hovering near its highest level since June 16 and on track for a monthly gain of 0.8%, supported by stronger-than-expected eurozone economic data.
The bloc's economy expanded by 0.4% in the Q2, surpassing forecasts of 0.2% and marking its fastest growth since early 2025.
Meanwhile, inflation accelerated across the euro area's largest economies in July, reinforcing concerns that higher energy costs could spill over into services and core prices.
As a result, markets fully priced in the European Central Bank's deposit rate reaching 2.75% by early 2027, implying two additional rate hikes, with the first potentially as soon as September.
In the US, the Federal Reserve left interest rates unchanged this week, while three FOMC members dissented in favor of a rate hike.
Markets now assign around a 65% probability of a September hike.
Meanwhile, oil prices fell, as energy shipments continued through key maritime routes despite limited progress in US-Iran talks.