Euro at a Minimum Since May 2025 Ahead of ECB Meeting

The euro is trading at its weakest level since May 2025 ahead of the ECB meeting on Thursday. As of 8:54 a.m. London time, it was down 0.2% to $1.1134; long-term options show the most bearish sentiment on the currency since March 2025. France's fiscal problems and new political risks in the region are leading the euro to its worst two-month performance since the end of 2024.

The ECB is expected to keep rates unchanged, assessing the inflationary impact of high energy prices and the economic slowdown. The attractiveness of the dollar against the single currency is enhanced by expectations of a Fed rate hike. “The euro-dollar pair has shown that it is not yet ready to break 1.11,” said Francesco Pesole, FX strategist at ING. “We do not expect today’s ECB event to trigger a significant downward movement.”

Technical momentum may increase pressure and lead the euro to a fresh 17-month low. The fear and greed indicator, which measures the ratio of buying and selling strength, remains bearish for the longest period since January 2025; the current series is the third largest accumulated bearish episode in six years.

Weekly risk reversals show that traders have become less bearish on the euro in recent sessions, but annual ones indicate that the premium for the currency's decline continues to grow. This suggests that concerns about France are structural and more strongly reflected in long-term rates. According to currency traders who wished to remain unnamed, short bearish option structures have recently been closed; they also pointed to interest in selling below $1.11.