Euro slides to 17-month low, hit by rates and inflation mix
LONDON: The euro hit its lowest point in 17 months on Thursday, as investors battered European assets in light of the impact on the regional economy from higher oil prices and inflation, while mounting political uncertainty added to an uncertain backdrop.
On Thursday, the euro plummeted to its lowest level in 17 months, driven by a combination of rising oil prices, inflation concerns and political instability in Europe. The currency fell below US$1.13 for the first time since May 2025, dropping against the dollar and other major currencies. Higher energy costs and inflation are threatening the global economy, and Europe's economic position is increasingly precarious due to growing political uncertainties, including a contentious French election next year and the far-right AfD party's rise in German regional elections.
Despite the European Central Bank's early interest rate hikes and the expectation of further rate increases, the euro has been unable to gain much traction. European stocks and bond prices declined, further weighing on the euro. Meanwhile, the US dollar has been on a streak of consecutive quarterly gains against other currencies since early 2022, when US interest rates were rising more rapidly than those in other nations.
The dollar has shown greater sensitivity to 10-year Treasury yields than to when the next Federal Reserve rate hike might occur.
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