Euro rises 0.7% to $1.12, then retreats as ECB holds rates
Key Facts
The euro rose 0.7% against the dollar from the session low near 1.11 to 1.12 on Friday morning, October 30, in a move FXStreet analysis described as forming a double bottom. But the pair later slipped to about 1.1140 after reaching an intraday high of 1.1214, according to FXStreet at 14:07 GMT. This sequence puts the morning rebound in context, as the advance did not last through the end of the session. The European Central Bank’s reference rate on the same day was $1.1172 per euro, a reference rate that does not represent a daily close. The move came after the ECB decided on October 29 to leave all three interest rates unchanged.
The bank kept its deposit facility rate at 2.50%, its main refinancing operations rate at 2.65% and its marginal lending facility rate at 2.90%. ECB President Christine Lagarde said the Governing Council would take a data-dependent approach and assess policy at each meeting. She added that the bank “is not pre-committing to a particular rate path,” leaving decisions at upcoming meetings tied to the evolution of economic indicators. Policymakers face pressure from rising prices, while growth data continue to offer a mixed picture of activity. The bank said persistently higher energy prices add to inflation risks and weigh on the growth outlook.
Euro-area inflation rose to 3.8% in September from 3.2% in August, while energy inflation increased to 18.9% from 14.3%, the ECB said. The bank attributed continuing price risks to higher energy costs, warning that a larger and more prolonged energy shock could push up inflation and lower growth. In its fourth-quarter Survey of Professional Forecasters, the projection for inflation in 2026 was raised to 3.0%, up 0.3 percentage points from the previous survey. The projection for 2027 also rose to 2.6%, up 0.4 points, while the 2028 forecast remained at 2.0%. The bank attributed these revisions mainly to higher and persistent energy prices.
By contrast, the euro-area economy grew 0.4% in the third quarter from the previous quarter, according to the preliminary estimate published by the Associated Press, exceeding market analysts’ forecast of 0.2%. The figures showed divergent performances among major economies: Germany grew 0.2%, while the French economy contracted 0.1%. Ireland recorded growth of 5.5%, and regional growth would have been 0.2% excluding it, the agency said. The ECB said services in the region recovered after weakening at the start of the conflict in the Middle East. It also said investment linked to artificial intelligence and government spending on infrastructure and defense are supporting activity.
The Survey of Professional Forecasters put annual growth at 1.0% in 2026 and 1.3% in both 2027 and 2028, with the 2026 forecast revised up by 0.4 percentage points. The survey was conducted between October 2 and 7, and the bank received 52 responses. On a quarterly basis, respondents expected growth of 0.2% in the third quarter and 0.3% in the fourth quarter of 2026. Their projections extended to the first and second quarters of 2027 at 0.3% and 0.4%, respectively. Comparing the forecasts with the preliminary estimate shows that actual third-quarter growth exceeded the expectations of analysts and survey participants.
In explaining currency moves, FXStreet analysis linked the dollar’s decline to technology-stock selling after disappointing results from some companies and the approach of the U.S. midterm elections. It said Alphabet shares fell about 13%, and that the company’s market value loss was nearly $500 billion. The report presented these factors in the context of dollar weakness, alongside monetary-policy developments and economic data, without establishing a single cause for the euro’s move. On the next economic step, the ECB said the Eurosystem staff macroeconomic projections for the euro area will be published on December 18, 2026. Those projections will follow the rate decision in which the bank kept policy dependent on data and successive meetings.