Euro slides 2% in September on energy shock and political risks
The euro has fallen nearly 2% in September to around $1.137, pressured by an energy shock, political risks, and a stronger dollar, raising concerns about the euro zone's economic outlook. German Chancellor Friedrich Merz faces political pressure after far-right gains, while France's high debt and gridlock have widened its borrowing-cost premium over Germany to above 110 basis points. Surging European gas prices above 80 euros per megawatt-hour, driven by Strait of Hormuz disruptions, threaten growth resilience. Markets price in at least one more ECB rate increase this year, offering some support, but options show rising demand for protection against a weaker euro. Forecasts range from $1.16 to $1.12 depending on energy prices.