The euro fell below $1.13 against the U.S. dollar on Thursday, reaching its lowest level in 17 months.

The decline comes as European markets face a combination of higher energy prices, inflation concerns and political uncertainty.

Oil adds pressure

Europe’s dependence on imported energy makes higher oil prices an important economic risk.

Renewed energy-market pressure has increased concerns that inflation could remain elevated.

That creates a difficult environment for European policymakers.

France faces higher borrowing costs

French government bond yields reached another 14-year high as investors continued to focus on the country’s fiscal position.

Higher borrowing costs can increase the pressure on governments already dealing with large debt burdens.

Germany faces political uncertainty

Germany’s financial markets are also being affected by political concerns.

Recent regional election gains by the AfD have added to uncertainty surrounding the country’s political environment.

What happens next?

The euro’s direction will depend on several factors, including energy prices, inflation, European interest rates and government finances.

For European consumers, the issue matters because currency movements can affect the cost of imported energy and goods.