Euro Near Multi-Month Lows Ahead of ECB Decision

The euro traded little changed at around $1.12, hovering near multi-month lows as investors awaited the European Central Bank’s policy decision and a series of key inflation and GDP releases across the region, while France’s worsening fiscal outlook and bond-market pressures continued to weigh on sentiment. The ECB is widely expected to keep interest rates unchanged this week amid signs of slowing economic momentum, leaving investors focused on its forward guidance. GDP data due Friday are expected to show weaker eurozone growth, reflecting headwinds including summer heat waves, low water levels in major waterways and a surge in global bond yields. Meanwhile, the inflation picture remains mixed, with a German fuel-tax rebate and easing Spanish inflation expected to temper price pressures. Across the Atlantic, the US Federal Reserve is also widely expected to leave rates unchanged this week. Markets are currently pricing in rate hikes from both central banks only in December.

The euro dropped to $1.12, remaining close to multi-month lows following the release of weaker-than-expected PMI data, while concerns over social unrest and rising public debt across Europe continued to weigh on the currency. Flash data showed eurozone private-sector growth slowed in October to a four-month low, pressured by rising energy costs, higher interest rates and renewed contraction in France amid political and fiscal uncertainty. Consumer confidence also deteriorated more sharply than expected. Meanwhile, investors remain concerned about rising borrowing costs across Europe, particularly in France, where 10-year government bond yields reached fresh 24-year highs and the risk premium climbed to levels last seen during the 2011 eurozone sovereign debt crisis. Looking ahead, further demonstrations are expected across the region this weekend, while investors await next week’s inflation data and the ECB’s policy meeting, where rates are widely expected to remain unchanged.

The euro remained under pressure around $1.12, as rising French borrowing costs and worsening tensions between the US and Europe over Russia’s war in Ukraine weighed on sentiment. France’s 10-year OAT yield climbed above 5%, its highest level since 2002, reflecting mounting concerns over France’s public finances and social unrest. Meanwhile, relations between Washington and European allies have deteriorated as US President Donald Trump deepens his engagement with Russian President Vladimir Putin. Recent moves, including easing sanctions on Moscow and questioning Ukraine’s political leadership, have heightened uncertainty over Western unity and future support for Kyiv. Elsewhere, rising oil prices amid the ongoing Iran war have intensified inflation concerns and increased expectations of tighter monetary policy, weighing on Europe’s growth outlook. Political uncertainty ahead of key elections across major European economies has added to the pressure on the single currency.