The euro slipped back below $1.12, retreating from one-month highs, as a global selloff in technology stocks boosted demand for the safe-haven US dollar. Sentiment toward AI-related shares deteriorated amid worries that a Democratic sweep in the upcoming congressional elections could usher in tighter regulation and slow the sector’s growth.
At the same time, investors continued to reassess the European Central Bank’s policy outlook. ECB President Christine Lagarde said on Thursday that the bank is closely watching incoming data to judge whether a rate hike will be warranted next month. While the ECB kept its deposit rate unchanged at 2.5% last week, several officials—including the heads of the German and Italian central banks—have indicated that an increase in December remains likely.
Adding to the case for further tightening, eurozone inflation accelerated to 4% in October, a three-year high, driven primarily by higher energy costs. Money markets now reflect expectations of two rate hikes by mid-2027, with the first potentially arriving as early as December.
