Euro Nears 1.12 After Rising 0.7% as ECB Rate Path in Focus
Key Facts
The euro recouped some of its losses against the dollar, with the pair rising 0.7% from its session lows near 1.11 and attempting to move above 1.12 on the morning of Friday, October 30, according to FXStreet analysis. The move came after the dollar fell on Thursday, while the report described the price action as forming a double bottom. But the attempt to rise above 1.12 did not mean a confirmed breakout or a close at that level. EL7 data put the pair’s daily close at 1.11655 on October 30. That puts the trading rebound in context: the pair approached 1.12 during the session, while its close remained below it.
The euro’s move came after the European Central Bank decided on October 29 to leave its three key interest rates unchanged. The deposit facility rate remained at 2.50%, the main refinancing operations rate at 2.65%, and the marginal lending facility rate at 2.90%. The decision therefore included no commitment to raise rates in December and no advance indication of the monetary policy path. The bank said it would follow a data-dependent approach and assess its position at each meeting. At the news conference, it stressed that it was "not pre-committing to a particular rate path," leaving future meeting decisions open to incoming data.
Growth data, however, came in stronger than market expectations: the euro zone economy grew 0.4% in the third quarter from the previous quarter, against market analysts’ expectations of 0.2%, according to The Associated Press. On an annual basis, growth was 1.3% in the period from July to September 2026 compared with the same period a year earlier. The central bank said the latest indicators point to continued growth in the region’s economy in the third quarter. It also said the services sector recovered after weakening at the start of the conflict in the Middle East. These indicators show continued growth, while risks to the economic outlook vary between activity and energy pressures.
By contrast, euro zone inflation rose to 3.8% in September from 3.2% in August, while energy inflation jumped to 18.9% from 14.3%, according to European Central Bank data. Headline inflation remained above the bank’s 2% target, The Associated Press reported. Participants in the bank’s Survey of Professional Forecasters also raised their inflation estimate for 2026 to 3.0%, up 0.3 percentage points from the previous survey. They lifted their 2027 estimate to 2.6%, an increase of 0.4 points, while keeping their 2028 forecast at 2.0%. These estimates highlight how the price surge pushed inflation expectations higher over the near and medium term.
The bank said energy prices continued to rise, increasing inflation risks and weighing on growth prospects, and that the scale and duration of the energy shock could push inflation higher and weaken activity. In the Survey of Professional Forecasters, 43% of participants expected the deposit facility rate to rise to 2.75% during the fourth quarter of 2026, while the most common expectation, held by 48%, was for the rate to remain at 2.50%. These are survey results, not an official decision or guidance from the bank. The Associated Press reported that inflation above target could open the door to an increase at the December meeting, while the bank made no commitment to a particular path. The bank said future rate decisions would remain data-dependent and be made meeting by meeting.
In the market, FXStreet linked Thursday’s dollar decline to weaker Treasury yields and selling in megacap stocks, amid pressure associated with disappointing results from some companies. The report said Alphabet shares fell about 13% and that the loss in market value came close to $500 billion, describing it as the largest in the company’s history. Reuters, via Investing.com, also reported that the euro edged higher on Thursday after the European Central Bank held rates, while the dollar fell against most major currencies following data showing an increase in U.S. inflation. These moves provide context for the pair’s rebound, alongside expectations for European monetary policy. Friday’s story, however, remained an attempt to move above 1.12, not a daily close above it.