Euro Hits 15-month Low

The euro ended September near $1.135, close to its lowest level since May 2025, after falling more than 2% against the US dollar, the sharpest monthly decline in 14 months. It also marked a third consecutive quarterly decline, as markets expected the ECB to tighten more slowly than the Fed. Markets are pricing in further ECB rate hikes over the coming year, with the next move potentially coming in December alongside updated economic projections, while the Fed faces a near 45% chance of another hike as early as October. Meanwhile, inflation in Europe’s largest economies accelerated in September, driven largely by fuel, although ECB President Christine Lagarde said the recent surge had yet to generate significant second-round effects, pointing to a measured policy response. Weak eurozone growth, seen at just 0.9% this year, could also limit aggressive tightening, while political uncertainty ahead of elections in France, Spain and Italy next year continued to weigh on the currency.

EURUSD decreased to 1.13, the lowest since May 2025. Over the past 4 weeks, Euro US Dollar lost 2.58%, and in the last 12 months, it decreased 3.55%.

The euro fell to around $1.135, its lowest since May 2025, pressured by broad dollar strength and expectations that monetary tightening in Europe will lag the US. Stalled talks over reopening the Strait of Hormuz pushed oil prices higher, reinforcing expectations of further Fed rate hikes and boosting safe-haven demand for the dollar. Meanwhile, ECB President Christine Lagarde said Monday that the recent inflation surge has yet to generate significant second-round effects, suggesting a measured policy response. The eurozone’s weak outlook could also limit aggressive ECB tightening, with GDP seen growing just 0.9% this year. The currency also remained under pressure from political uncertainty ahead of key elections in France, Spain and Italy next year. Still, with inflation above 3% and potentially nearing 4% by year-end, markets are pricing in up to four additional rate hikes over the next year, with the ECB expected to resume tightening in December when fresh projections are released.