Euro Falls to 17-Month Low Amid Political and Economic Uncertainty
The euro extended its decline to a 17-month low on Monday, falling to around $1.117, amid growing fiscal and political uncertainties in Europe. The Spanish government and Socialist party officials are reportedly considering an early election after Prime Minister Pedro Sánchez’s administration faced a significant parliamentary setback last week. This development has intensified concerns about France’s political stability and budget outlook.
On the monetary policy front, the European Central Bank (ECB) is likely to adopt a cautious stance on further tightening. This cautious approach comes as rising energy prices pose inflation risks while simultaneously dampening economic growth. Eurozone inflation surged to 3.8% in September, marking the highest rate in three years and significantly exceeding the ECB’s 2% target.
Meanwhile, the US dollar maintained its strength despite weaker-than-expected US jobs data. This added to the downward pressure on the euro, even as expectations for a Federal Reserve interest rate hike this month were scaled back.