The euro tumbled to its weakest level in a year on Friday as oil prices slid back to pre-war levels, fueling fresh bets on an imminent European Central Bank rate cut. The single currency fell below 1.07 against the dollar in early European trading, extending losses after Brent crude dropped more than 2% to trade near $72 a barrel .

Analysts said the decline in crude prices—now back to levels last seen before Russia’s 2022 invasion of Ukraine—reflects easing geopolitical tensions and weaker-than-expected demand from top importers. “The oil price has fallen to pre-war levels,” noted an analyst quoted by *Aftenposten* . “We expect a rebound once demand picks up again.” The drop follows a brief surge earlier this week after attacks on commercial vessels in the Strait of Hormuz, which briefly pushed Brent above $75 before reversing course .

The ECB’s latest consumer survey, released Friday, showed median inflation expectations for the next 12 months fell to 3.5% in May from 4.0% in April, reinforcing market expectations of a rate cut at the central bank’s July meeting . Traders are now pricing in a roughly 70% chance of a 25-basis-point reduction, up from 50% a week ago.

The weaker euro and softer oil prices are also easing pressure on European households. In Sweden, Swedbank’s chief economist Mattias Persson told *Svenska Dagbladet* that the drop in crude “makes it less likely we’ll see strong inflationary pressure,” potentially reducing the need for further Riksbank tightening . Meanwhile, fuel retailers across the EU are expected to hold pump prices steady next week, though regional variations will persist depending on local competition and taxes .

The broader energy market remains volatile. EU imports of liquefied natural gas fell 8% in value in the first quarter, even as volumes rose 2.9%, underscoring shifting trade flows amid the global supply glut . For now, however, the combination of cheaper oil and cooling inflation expectations is reshaping the outlook for both monetary policy and consumer spending across the continent.

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Eurozone consumers see inflation dip over next 12 months The European Central Bank (ECB) released its Consumer Expectations Survey on Friday, showing that median inflation expectations for the next 12 months dropped significantly during May. Consumers inflation expectations for the coming year decreased to 3.5 per cent, down from 4.0 per cent in April. Meanwhile, the median rate of perceived inflation over the previous […]

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