Euro drops below 1.135, rising Oil and treasury yields "not exactly conducive of strength"

Matthew Ryan, CFA Ebury

The euro dropped below the 1.135 level on Tuesday to its lowest level since late-June, and is now trading close to its where it was in mid-2025. We see the move as largely driven by external factors. Growth in the Euro Area economy remains resilient, with activity seemingly unaffected by the spike in energy prices, while the ECB looks firmly set to raise interest rates again in December.

Yet the environment of rising oil prices and the surge in Treasury yields is not exactly conducive of strength in the common currency.

This morning’s French inflation figures were alarming, with the headline measure surging above 3% for the first time since the beginning of 2024.

A similarly hot reading in Friday’s Euro Area wide figures probably won’t be enough to bring an October ECB rate hike into view, though it would no doubt solidify bets in support of a December rate increase, which could offer some respite to the recent sell off in the euro.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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