Euro sinks to lowest level in 17 months: why is our currency losing ground?

The euro is under considerable pressure. Against the US dollar, the European currency has fallen to its lowest level in seventeen months. In just five weeks, the euro lost more than 3 percent of its value.

And that's not just because of the strong dollar. Especially the increasing economic and political problems in Europe are starting to take their toll.

Last week, the euro dropped to 1.1161 dollars, the lowest level since May 2025. On Monday, the coin traded around 1.1182 dollars.

The problems started in September, when the US central bank, the Federal Reserve, raised interest rates. Higher interest rates make US investments more attractive, which increases the demand for dollars.

But there is more going on now. France in particular is causing unrest. Investors are concerned about France's high public debt and 2027 budget plans. As a result, they demand an increasingly higher interest rate to lend money to the French government.

The interest rate differential between French and German government bonds has now risen to levels last seen during the 2012 European debt crisis. But Italy also wants to increase its budget deficit, and Spain is heading for early elections.

The necessary unrest in Europe, and on top of that the high oil price. Brent oil currently costs more than $100 per barrel. This can further boost European inflation, while economic growth is coming under pressure.

The European Central Bank (ECB) is therefore in a difficult position. Raising interest rates can help fight inflation and support the euro, but at the same time can further slow down the economy.

It also doesn't look particularly good on the graph for the time being. The euro previously fell back from the resistance around 1.18 dollars and is now approaching an important level around 1.11 dollars.  If that boundary doesn't hold up, the next major zone around $1.08 comes into view. With a further decline, there is still support around 1.05 dollars.

Yet not everyone is equally pessimistic. The Japanese bank MUFG expects a decline towards 1.10 dollars if the problems around the French national debt continue. On the contrary, ABN AMRO sees room for recovery and expects a euro exchange rate of 1.15 dollars by the end of the year.

The coming weeks will therefore be important. This week, new US inflation figures appear, followed by interest rate decisions by the Federal Reserve and ECB on 28 and 29 October. Those events can determine whether the euro finally regains some ground, or whether the decline continues.