Euro Plunges to 16-Month Low Amid Fed Rate Hike Bets

The euro has fallen to its weakest level in 16 months due to expectations that the Federal Reserve will further boost interest rates. This move has supported the US dollar, with the common currency dropping as much as 0.5% to $1.1312 on Tuesday, a price not seen since May 2025.

The euro's weakness is part of a broader trend of dollar strength, driven by rising yields and expectations that more US interest rate increases will be needed to combat inflation. The US 30-year yield has risen to its highest level since 2002, with nearly all currencies in the Group of 10 losing against the greenback in Tuesday trading.

Many investors believe that while the European Central Bank is set to raise rates, the US economy will be able to withstand more monetary tightening than the eurozone. This has led to a relative strength for the dollar, with strategists expecting it to extend its rally.