The euro hovered around $1.12, edging up from earlier monthly lows on the back of broad-based dollar weakness. Nonetheless, the common currency remains close to its weakest level since May 2025, as expectations of further Federal Reserve tightening to curb stubborn inflation continue to underpin the greenback.
Additional downward pressure on the euro has stemmed from political uncertainty in Europe, particularly in France. ECB President Christine Lagarde emphasized that France must tackle its debt problems through fiscal consolidation, dampening speculation that the central bank might step in by purchasing French government bonds to cap yields. She also highlighted that energy-driven inflation had not yet significantly spilled over into the wider euro-area economy, reinforcing a cautious stance on interest rates.
Even so, ECB policymaker Gediminas Šimkus kept the door open to another rate increase, stating that a hike as early as this month remains possible if warranted. Market participants still anticipate an additional ECB rate rise in December.
