Euro again hit annual low amid dollar strengthening
The euro continued to fall on the FOREX market. On Monday, October 12, the EUR/USD pair dropped to approximately 1.1152 dollars per euro, a low since the beginning of 2026. Pressure on the European currency increased amid the strengthening US dollar, rising oil prices, and fears of further tightening of monetary policy by the Federal Reserve System (Fed).
At the end of trading, the euro was under pressure from several factors, and market participants shifted their focus to the upcoming release of US inflation statistics.
Why the euro continues to fall
One of the main reasons for the decline in EUR/USD was the strengthening of the US dollar. Investors fear rising inflation in the US due to energy prices increase and assume that the Fed will have to maintain a tight monetary policy longer, or even raise interest rates again.
An additional factor was the statements of representatives of the American central bank. In particular, Cleveland Federal Reserve Bank President Beth Hammack noted the possible need for stricter policy to curb inflationary pressure. Such signals support the dollar, since higher rates make American assets more attractive to investors.
The oil market also works against the euro. Amid the aggravation of the situation in the Middle East and attacks on facilities in Saudi Arabia, oil prices have risen again. Expensive energy increases inflationary risks and at the same time increases European economy spending on fuel imports.
In addition, in conditions of geopolitical uncertainty, investors tend to invest in safe assets, among which the American dollar is traditionally in demand. As a result, the European currency experiences additional pressure.
What to expect from the euro next
In the coming days, the direction of EUR/USD movement will largely depend on American inflation data. If consumer price growth is higher than expected, the market may increase bets on a more stringent Fed policy. In this case, the dollar will receive additional support, and the euro risks recording new lows.
The technically important nearest mark for the pair remains the psychological level of 1.11. If sellers manage to fix the price below it, the pressure on the euro may increase. At the same time, a return above 1.12 would be the first signal of a possible short-term recovery, although by itself it would not mean a reversal of the downtrend.
A rebound of the euro after the recent decline is also possible: some investors may start taking profits on short positions. However, a sustainable recovery will require a weaker dollar, a decline in geopolitical risks, or more favorable economic signals from the eurozone.
Thus, short-term risks for the euro remain predominantly downward. While US inflation, oil prices, and expectations regarding Fed policy support the dollar, it will be difficult for the European currency to transition to steady growth. The main benchmarks for the market will be new data from the US and further developments in the Middle East.