The euro has fallen below $1.12, its lowest level since May 2025, due to rising energy prices, French debt tensions, and expectations of monetary policy from the European Central Bank (ECB). This decline has increased the cost of tourist services billed in foreign currencies, particularly in dollars, and reduced the margins of travel professionals.
The euro’s weakness is not solely due to a strong dollar, but also to the eurozone itself. Europe buys most of its energy abroad and pays for it in dollars, which means that every increase in energy prices forces it to buy more US currency, weakening the euro and fueling European inflation, currently at 3.8%.
Euro’s Decline and Its Impact
Two immediate causes have contributed to the euro’s decline. First, the ECB has raised its interest rate twice since June, but Christine Lagarde is advocating for a measured response, as credit is already becoming more expensive without energy prices affecting wages. As a result, investors are no longer expecting a rate hike this month, with the probability dropping from 60% to 18% for October.
Second, the French debt has widened the gap between what France and Germany pay to borrow for 10 years, reaching 1.41 percentage points on Friday. The budget will not be examined by Parliament until October 13, keeping the tension high.
According to State Street, the tension remains a French issue. Three possible exits for the euro are a cheaper energy, a calmer French debt, or a weakened dollar. The third option was tested on Friday when the US economy created only 29,000 jobs, but the dollar did not recede.
The exchange rate has broken through two technical thresholds against the dollar, with the euro falling to 1.116 on Monday. The next obstacles are 1.11 and 1.10, making hotel bookings, cruises, and receptions billed in dollars more expensive than in September.
The movement is not limited to the dollar, as the euro has also lost 1.17% against the British pound and 0.45% against the Canadian dollar over the week. It is currently trading at 0.846 pounds, just above its annual low of 0.8455.
Impact on Tourism
Dubai is a prime example of the direct impact of the euro’s decline. The value of the UAE dirham is fixed to the dollar, and a stay in the Emirates follows the euro’s movement against the dollar without any buffer. The margin is reduced accordingly, with the current exchange rate requiring approximately 4.10 dirhams for one euro, compared to 4.13 on Friday.
Two meeting reports are scheduled for the week: the US Federal Reserve on Wednesday and the ECB on Thursday. Each will reveal what the institution was considering before the publication of US employment and European inflation figures on Friday.
Philip Lane, the ECB’s chief economist, will open the week with the first official comment since the inflation figures were released.
The supports and resistances indicate the low and high points within which the exchange rates are expected to evolve during the week.
Market Outlook
This information is important for investors and travel professionals, as it will help them make informed decisions about their investments and bookings.