FX.co ★ Euro Weakens Further to Over One-Year Low

The euro depreciated further to around $1.135, its weakest level since May 2025, as stalled negotiations over reopening the Strait of Hormuz drove oil prices higher, reinforced expectations of additional Federal Reserve rate hikes, and bolstered safe-haven demand for the US dollar. Investors also assessed remarks from ECB President Christine Lagarde alongside flash inflation figures. Lagarde noted that the recent surge in inflation has not yet produced significant second-round effects across the euro area, indicating that a measured policy response remains appropriate. With eurozone inflation already above 3% and possibly nearing 4% by year-end, markets are pricing in as many as four additional rate increases over the next year, following two hikes over the summer. Most economists expect the ECB to resume tightening in December, when new economic projections will be released. Meanwhile, Spain’s harmonized inflation rate rose to 5% in September, its highest level in three years and well above the ECB’s 2% target.