On the FOREX currency market, the euro is trying to regain positions after sharp fluctuations caused by decisions of major central banks. Following the US Federal Reserve meeting, the dollar weakened, and the EUR/USD pair gained support. However, the subsequent decision of the European Central Bank (ECB) to keep interest rates unchanged did not provide the euro with sustainable growth.

On Thursday, October 29, the EUR/USD pair initially fell to around 1.11045 dollars — the lowest level since May last year — but then recovered. According to Reuters, after the ECB decision, the euro traded around 1.1163–1.1167 dollars. Thus, the market reaction was mixed: investors simultaneously assessed the prospects for US interest rates, inflation, and economic risks in the eurozone.

US Fed: why the dollar lost some advantages

At its meeting on October 28, the US Federal Reserve kept its interest rate unchanged. However, comments by Fed Chair Kevin Warsh were less clear-cut than some market participants had expected.

On the one hand, the American regulator emphasized the resilience of the economy and the need to continue fighting inflation. On the other, Warsh indicated that achieving the 2% inflation target was possible without excessive slowdown in economic growth and a sharp rise in unemployment.

These statements forced investors to reassess expectations regarding further monetary policy tightening. The dollar weakened, and the euro was able to recover part of its previous decline. An additional signal was the drop in yields on two-year US government bonds, which are sensitive to Fed rate expectations.

However, counting on a prolonged dollar weakening is premature. Market participants continue to factor in the probability of a Fed rate hike in December: according to market estimates cited by Reuters, it approached 80%. Therefore, future EUR/USD dynamics will largely depend on US statistics, especially inflation data.

ECB kept rates, but the euro received a mixed signal

On October 29, the European Central Bank also left interest rates unchanged. The deposit rate remained at 2.5%, the main refinancing operations rate at 2.65%, and the marginal lending rate at 2.9%.

However, the ECB decision was not a clear positive for the euro. The regulator warned that rising energy prices increase inflation risks, but at the same time noted that tightening financial conditions could restrain both inflation and economic growth.

At the press conference, ECB President Christine Lagarde said that the possibility of a rate hike was discussed, and markets began to price in the probability of further policy tightening in December. Lagarde also announced her intention to step down early on February 7, 2027. This news added uncertainty about the future leadership of the European regulator.

US statistics and French problems

The EUR/USD dynamics are influenced by other factors as well.

1. US inflation. September inflation measured by the PCE index, which the Fed uses to assess price pressure, accelerated. The core PCE rose to 3.1% year-on-year. This is an argument in favor of maintaining the American regulator's tight policy and a potential factor supporting the dollar.

2. US economic growth. According to preliminary data, the American economy grew by 3.4% annualized in the third quarter. Such dynamics reduce the need for rapid monetary easing, although weakening household incomes point to certain risks.

3. France's budget problems. Concerns about government debt and the political situation in France continue to weigh on demand for the euro. Investors fear that fiscal instability in the largest eurozone economies could complicate the ECB's work and slow the region's recovery.

Euro forecast on FOREX: can EUR/USD continue to rise?

On Friday, October 30, the euro is attempting to recover after falling to lows since May 2025. According to market quotes, the EUR/USD pair rose to around 1.12148 dollars. Additional support for the European currency came from falling US bond yields and a reduction in some speculative bets on further dollar strengthening.

In the coming days, two main scenarios are possible.

  • Positive for the euro: US bond yields will continue to fall, and investors will reduce expectations of a Fed rate hike in December. In this case, EUR/USD will be able to consolidate above $1.12 and attempt to build on the recovery.
  • Negative for the euro: new data will confirm persistent US inflation, and expectations of a Fed rate hike will strengthen. Then the dollar may strengthen again, and the EUR/USD pair risks returning to recent lows around $1.11.

Main conclusion: the euro's rise after the Fed meeting is primarily due to dollar weakening and a reassessment of expectations regarding future US monetary policy. However, fundamental risks remain: US inflation remains high, the American economy shows resilience, and the eurozone faces energy and fiscal problems. Therefore, the current euro recovery should for now be viewed as an attempt at correction, not as a confirmed reversal of the long-term trend.