2026.03.3009:16:06UTC+00Euro Set to End March 2% Weaker

By the end of March, the euro had slipped to $1.15, hovering near its weakest level since mid-month and heading for a monthly loss of more than 2% against the dollar. Risk aversion intensified as traders assessed the economic impact of the escalating conflict in the Middle East. Reports that the US was preparing troops for a potential ground operation overshadowed Washington’s assertions of progress in talks with Iran.

Economic data further weighed on the single currency. Regional CPI figures from Germany signaled mounting inflation pressures in Europe’s largest economy, while a key Eurozone business survey showed a sharp deterioration in sentiment amid a jump in inflation expectations.

In response, markets have dramatically adjusted their outlook for ECB policy. Investors now expect at least two interest rate increases in 2026, and possibly a third, abandoning earlier pricing that implied a roughly 40% probability of a rate cut. At the same time, Banque de France Governor François Villeroy de Galhau underscored the ECB’s determination to keep energy-driven inflation in check, though he cautioned that it remains “too early” to discuss the precise timing of any rate hikes.