Euro Hits 16-Month Low
The euro tumbled to $1.11 on Wednesday, touching its weakest level since May 2025, as investors flocked to the US dollar following stronger-than-expected inflation data that reduced the likelihood of the Federal Reserve holding rates steady in October. US inflation rose to 3.7% year-on-year in September, above forecasts of 3.6%, while core inflation also exceeded expectations. Markets now see around a 50% chance of the Fed keeping rates unchanged this month, down from over 78% before the report. Meanwhile, expectations that the ECB will delay further rate hikes until December, alongside concerns over the impact of rising inflation and borrowing costs 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.
The euro tumbled to $1.11 on Wednesday, touching its weakest level since May 2025, as investors flocked to the US dollar following stronger-than-expected inflation data that reduced the likelihood of the Federal Reserve holding rates steady in October. US inflation rose to 3.7% year-on-year in September, above forecasts of 3.6%, while core inflation also exceeded expectations. Markets now see around a 50% chance of the Fed keeping rates unchanged this month, down from over 78% before the report.
Meanwhile, expectations that the ECB will delay further rate hikes until December, alongside concerns over the impact of rising inflation and borrowing costs 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.