Euro hovers at 16-month lows amid negative pressures

The euro declined in the European market 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 euro lost 2.5% against the dollar last September, marking its first monthly loss in the last three months and its largest monthly decline since July 2025, due to historic jumps in US Treasury yields, in addition to growing concerns related to debt and energy prices in Europe.

Following the Federal Reserve's decision this month to raise US interest rates by 25 basis points to the 4% range, interest rate differentials between Europe and the United States widened to 135 basis points in favor of US rates, which enhances investment opportunities in the US dollar against the euro.

Federal Reserve Governor Lisa Cook said on Wednesday that inflation has remained too high for too long, confirming that US inflation has exceeded the Fed's 2% target for more than five years. Cook added, 'We are committed to returning inflation to the central bank's target while maintaining a strong labor market.'

Regarding the euro's performance outlook, we at FX News Today expect the euro to continue moving in negative territory against the US dollar. It may lose trading above the $1.13 barrier for the first time since May 2025, as investors focus on buying the US currency as one of the best investment opportunities in the foreign exchange market.

Most US stock indices fell during Wednesday's trading; the Dow Jones declined, while the Nasdaq rose and the S&P 500 fell. However, both indices recorded a second consecutive quarterly gain after a lower-than-expected inflation reading led to a decline in expectations that US Federal Reserve officials would raise interest rates in October.