EUR/USD Hits 16-Month Low as Yield-Spread Trade Favors Dollar

The EUR/USD pair has been trading at 1.1316 in the European afternoon, down 0.12% on the day and four pips above Tuesday's intraday low of 1.1312.

This is the euro's weakest level since May 2025, marking a 16-month low for the currency.

The pair has now closed below 1.1350 for two straight sessions, and September saw a significant decline in EUR/USD, losing 2.3% of its value.

This loss is attributed to the yield-spread trade, with the U.S. 10-year Treasury yield at 5.34%, its highest since 2002, and Germany's 10-year Bund trading at 3.56%.

The spread between them is 173 basis points in favor of the dollar, drawing capital into the dollar and keeping EUR/USD under pressure.