Euro Falls to 18-Month Low Against Dollar on Fed Rate-Hike Bets

By Renae Dyer

The euro fell to an 18-month low against the dollar Wednesday as markets bet on the possibility of more aggressive interest-rate hikes by the Federal Reserve.

Higher-than-expected U.S. inflation data and remarks from Fed governor Christopher Waller on Tuesday supported the prospect of the Fed raising rates in December, with some market participants now expecting a 50-basis-point hike.

U.S. rate-rise prospects strengthened the dollar while the euro continued to be affected by French debt concerns and recently-trimmed market expectations for European Central Bank rate increases following a pullback in oil prices.

The euro dropped to $1.1084 in Europe's afternoon trade, its lowest levels since May 2025, according to LSEG data. The DXY dollar index, which measures the dollar against a basket of currencies, rose to a four-week high of 102.932. The Japanese yen also suffered, with the dollar-yen exchange rate rising to a two-month high of 159.70 yen.

U.S. consumer prices rose 0.4% month-on-month in October, above the 0.3% expected by economists in a Wall Street Journal survey. Core consumer prices increased 0.3%, exceeding the 0.2% forecast.

Speaking at a conference in London, Waller said he would support the Fed raising rates by 25 basis points in December. However, a 50-basis-point increase should be considered if core inflation came in at 0.3% or higher in October, he said.

Money markets on Wednesday priced an 88% chance of a 25-basis-point rate increase at the Fed's meeting in December and at 12% chance of a 50-basis-point move, LSEG data showed.

"With a December hike already the base case, further dollar gains may require stronger bets on a half-point move," DHF Capital asset manager Bas Kooijman said in a note.

A firm producer price index reading on Friday or hawkish Fed remarks could lift yields and push the dollar above recent highs, he said. Softer data or resistance to a larger hike could unwind some of the dollar's gains, however, he said.

The market sees a 78% chance of a 25-basis-point hike at the ECB's December meeting.

"The ECB, however, could prove to be reluctant to hike rates beyond December," Rabobank foreign-exchange strategist Jane Foley said in a note.

The last ECB press conference suggested the governing council was becoming increasingly concerned about the growth outlook, she said.

Another factor that could weigh on the euro in coming months are uncertainties about what the possibility of a far-right president in France following next year's presidential election could mean for EU co-operation going forward, she said.

Rabobank expects the euro to fall to $1.10 within three months.

Write to Renae Dyer at renae.dyer@wsj.com

(END) Dow Jones Newswires

November 11, 2026 10:04 ET (15:04 GMT)