FX.co ★ Euro Hits 16-Month Low

The euro slid to $1.11, its weakest level since May 2025, as investors moved into the US dollar after stronger-than-expected inflation data reduced the odds that the Federal Reserve will keep interest rates unchanged in October. US annual inflation accelerated to 3.7% in September, above the 3.6% consensus forecast, while core inflation also came in higher than expected. Markets now assign roughly a 50% probability that the Fed will leave rates on hold this month, down from more than 78% before the data release.

At the same time, expectations that the ECB will postpone any further rate hikes until December, together with mounting worries about the impact of rising inflation and higher borrowing costs on economic growth, continued to pressure the single currency. Fiscal strains in highly indebted economies, particularly France, further added to downside risks. ECB President Christine Lagarde emphasized that elevated, energy-driven inflation has not yet become broad-based across the euro area, bolstering the case for a cautious, wait-and-see stance.