Euro Hits 16-Month Low

The euro tumbled to $1.11, touching its weakest level since May 2025, as investors flocked to the US dollar as stronger-than-expected US inflation data boosted expectations of a Federal Reserve rate hike in October. US inflation rose to 3.7% year-on-year in September, above forecasts of 3.6%, while core inflation also exceeded expectations. Meanwhile, expectations that the ECB will delay further rate hikes until December, alongside concerns over the impact of rising inflation on economic growth, continued to weigh on the common currency. Fiscal pressures in highly indebted countries, particularly France, added to the downside risks. ECB President Christine Lagarde noted that elevated energy-driven inflation has yet to spread across the broader euro-area economy, reinforcing the case for a wait-and-see approach. However, ECB policymaker Gediminas Šimkus said another rate hike could be necessary and could not be ruled out this month.

EURUSD decreased to 1.12, the lowest since May 2025. Over the past 4 weeks, Euro US Dollar lost 3.38%, and in the last 12 months, it decreased 4.24%.

The euro was little changed at $1.12, recovering from its weakest level in a year and a half, as investors assessed remarks from European Central Bank President Christine Lagarde and awaited US inflation data for fresh clues on the Federal Reserve’s rate path. Lagarde said elevated euro-area inflation driven by high energy prices has yet to feed into the broader economy. Speaking at a CNN event in Bangkok, she said policymakers are monitoring indirect effects and potential second-round inflationary pressures, stressing the need for caution despite no clear signs of such effects emerging so far. Meanwhile, inflation continues to exceed forecasts, while the US-Iran conflict shows little sign of easing, prompting markets to price in another ECB rate hike in December. Despite its recent recovery, the euro remains under pressure from surging energy prices, persistent inflation and rising borrowing costs, as well as fiscal concerns in highly indebted countries, particularly France.