Euro Hits One-Year Low Amid Oil Price Surge and Rate Hike Expectations

The euro has weakened to its lowest level in over a year, reaching around $1.135. This decline is attributed to several factors, including stalled negotiations over reopening the Strait of Hormuz and strengthened expectations of further Federal Reserve rate hikes.

Oil prices have risen due to these tensions, pushing demand for safe-haven assets like the US dollar higher. Additionally, investors are weighing comments from ECB President Christine Lagarde alongside flash inflation data.

Lagarde stated that the recent inflation surge has not yet generated significant second-round effects across the euro area, suggesting a measured policy response remains appropriate.

Given eurozone inflation is already above 3% and potentially approaching 4% by year-end, markets are pricing in up to four additional rate hikes over the next year. Economists generally expect the ECB to resume tightening in December when fresh economic projections are due.