Euro Plummets to 17-Month Low on European Fiscal Worries

The EUR/USD exchange rate has been in sharp decline, reaching its lowest point in 17 months as concerns over European fiscal health intensify. The pair dropped to 1.1162, marking a 4.67% fall from its September high. Rising government bond yields across Europe, particularly in France where the 10-year yield hit 4.99%, have fueled investor anxiety. Spain’s potential early election and ongoing protests in France have further heightened instability risks, signaling investor unease about the region’s fiscal future.

The EUR/USD pair is also under pressure due to technical indicators, including a confirmed breakdown below the 1.1391 support level and bearish signals from the 50-week moving average and Supertrend indicator. Analysts are eyeing the psychological support level of 1.100 as the next key target. The upcoming Federal Reserve minutes, set to be released on Wednesday, could provide further insights into the pair’s direction, though recent weak economic data in the U.S. suggests the Fed may not raise rates again this year.

European economies are struggling, with the European Central Bank forecasting growth of just 0.9% this year, well below the current inflation rate. The U.S. economic reports, including a softer core PCE and a lower-than-expected jobs report, indicate a potential slowdown. These factors combined have contributed to the euro’s freefall, with the next major catalyst likely to be the Fed’s policy direction.