The euro fell in European trading on Thursday against a basket of global currencies, extending its losses for the fourth consecutive day against the US dollar and nearing its lowest level in 16 months, amid negative pressures, particularly those related to interest rate differentials between Europe and the United States.
The likelihood of a European interest rate hike this October has diminished, especially after European Central Bank President Christine Lagarde's testimony before the European Parliament, which included less hawkish comments than expected in the markets.
Price overview
Euro exchange rate today: The euro fell against the dollar by more than 0.1% to ($1.1315), from today’s opening price of ($1.1329), and recorded a high of ($1.1337).
The euro ended Wednesday's trading down 0.1% against the dollar, its third consecutive daily loss, and the previous day hit a 16-month low of $1.1312, due to declining prospects of a third European interest rate hike this year.
The euro lost 2.5% against the dollar in September, its first monthly loss in the last three months and its biggest monthly loss since July 2025, due to historic jumps in US Treasury yields, as well as growing concerns about debt and energy prices in Europe.
European interest rate
European Central Bank President Christine Lagarde told the European Parliament's Economic and Monetary Affairs Committee in Brussels on Monday that the energy shock is raising inflation expectations, but there are still no signs of a tangible impact.
Lagarde stressed that the bank does not currently see a need for an exaggerated response to the inflation shock, considering that the size of the shock does not allow it to be ignored, but a gradual monetary response remains appropriate at the moment.
Following the above statements, the money market's pricing of the likelihood of the European Central Bank raising European interest rates by about 25 basis points next October has fallen from 50% to 40%.
In order to reprice those possibilities, investors are awaiting the release of key inflation data in Europe for September tomorrow, Friday.
Interest rate differentials
After the Federal Reserve raised US interest rates by about 25 basis points to a 4% range this month, the interest rate differential between Europe and the United States widened to 135 basis points in favor of the US interest rate, which enhances the investment opportunities in the US dollar against the euro.
The US dollar index rose 0.2% on Thursday, extending its gains for the fourth consecutive session and hitting a four-month high of 101.65 points, reflecting the continued rise of the US currency against a basket of major and minor currencies.
The yield on 10-year U.S. Treasury bonds rose 0.4% on Thursday, extending its gains for the second consecutive session and hitting a 24-year high of 5.310%, providing further support for the U.S. dollar exchange rate.
More hawkish comments are coming from Federal Reserve officials, which strongly reinforces the likelihood of another US interest rate hike during the remainder of this year.
Federal Reserve member Lisa Cook said on Wednesday that inflation has remained too high for too long, noting that U.S. inflation has exceeded the Fed's 2% target for more than five years. Cook added, We are committed to bringing inflation back to the central bank's target while maintaining a strong labor market.
