The euro started October weaker, slipping toward $1.13 and its lowest level since May 2025, after falling more than 2% against the dollar in September, its sharpest monthly decline in 14 months. Markets expect the ECB to tighten more slowly than the Fed, with further ECB hikes priced in over the coming year and the next move potentially in December alongside updated economic projections. Meanwhile, inflation accelerated across several major European economies in September, driven largely by fuel prices. ECB official Peter Kazimir said that the central bank has time to keep policy flexible after two rate hikes this year, echoing President Christine Lagarde’s comments earlier this week. A subdued eurozone growth outlook, currently seen at just 0.9% this year, could further constrain the ECB’s room for aggressive tightening. Political uncertainty ahead of elections in France, Spain and Italy next year is also weighing on sentiment toward the single currency.