Euro Slips to Fresh 15-Month Lows

The euro started October weaker, slipping below $1.13 and its lowest level since May 2025, after falling more than 2% against the dollar in September, its sharpest monthly decline in 14 months. Markets expect the ECB to tighten more slowly than the Fed, with further ECB hikes priced in over the coming year and the next move potentially in December alongside updated economic projections. Meanwhile, inflation accelerated across several major European economies in September, driven largely by fuel prices. ECB member Isabel Schnabel said Wednesday that the coming months will help assess the energy shock and determine how high to take rates, suggesting the central bank’s most hawkish policymaker is taking a wait-and-see approach as the US-Iran war enters its eighth month. A subdued growth outlook could further constrain the ECB’s room for aggressive tightening, while political uncertainty ahead of elections in France, Spain and Italy next year is also weighing on sentiment.

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%.