The euro climbed above $1.125, its highest level since early October, as investors reacted to faster eurozone inflation and an unexpected, sweeping Democratic victory in the US midterm elections that pressured the dollar.
Eurozone annual inflation accelerated to 4.0% in October, the highest reading since September 2023 and well above the European Central Bank’s 2% target, driven primarily by a sharp rise in energy costs. The single currency also benefited from increasingly hawkish signals from ECB policymakers. Although the ECB kept interest rates on hold last week, officials indicated that additional rate hikes may still be required to contain inflationary pressures and prevent them from passing through to wages, reinforcing expectations of a tighter policy stance.
At the same time, the surprise outcome of the US elections added to downward pressure on the dollar. Risk assets such as AI-related stocks and cryptocurrencies also retreated amid growing concerns about stricter regulatory oversight.
