Euro sinks to weakest since April 2025 on dollar strength

The euro has broken through the modest support that held at May 2025's low, reaching its weakest level since April 2025.

Pressure is stemming from the US dollar as Treasury yields rise again today. Beth Hammack, a Fed hawk, objected to a 50-basis-point rate hike, but a growing number of Fed officials argue that rates must climb to 'restrictive' levels and that the current stance remains in accommodative territory.

The main takeaway: two rate hikes are insufficient, and the market now prices in 85 basis points of increases over the next twelve months. The market is also asking what has caused such alarm. Some of that is likely due to the latest CPI report, which revealed a widening of inflation pressures.

Looking at today's price action, US two-year yields rose 12 basis points to 4.85%. That is an increase from 4.44% on November 6, placing them close to the September highs.

In contrast, the eurozone seems nearer to the end of its rate hiking cycle, with the market pricing in about 50 basis points over the next year.

Artificial intelligence is another factor in the dynamic. Funds are pouring into the US for AI investment opportunities, and AI trading has picked up. CNBC reported today that OpenAI raised $15 billion at a $1.25 trillion valuation. That is positive for Anthropic ahead of its IPO next week. The valuation range is reported as $1.25-1.75 trillion, and Anthropic is broadly seen as more valuable than OpenAI.

A strong IPO could ease concerns about neoclouds and AI capital expenditure overall. This week brought some good news: CoreWeave jumped on earnings, though it has given back some ground today. Memory stocks have also rebounded.

Ultimately, this trade comes down to economic momentum, and the market currently fails to find reasons to favour Europe.