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Euro hits 17-month low as ECB holds rates, US PCE inflation accelerates

  • EUR/USD falls to a fresh 17-month low of 1.1104 as the US Dollar strengthens.
  • The European Central Bank held interest rates steady amid persistent inflation risks.
  • Strong US growth and accelerating inflation reinforce expectations of a Fed rate hike in December.

EUR/USD extends its decline on Thursday, hitting a fresh 17-month low of 1.1104, its weakest level since May 2025. The pair trades around 1.1120 at the time of writing, down 0.28% on the day, as the Euro (EUR) struggles against a stronger US Dollar (USD), supported by persistent inflation and resilient economic growth.

The European Central Bank (ECB) announced on Thursday that it maintained its key interest rates following its October monetary policy meeting, in line with expectations. The interest rates on the main refinancing operations, marginal lending facility and deposit facility remain at 2.65%, 2.9% and 2.5%, respectively.

The ECB highlighted that rising energy prices pose upside risks to inflation and downside risks to economic growth. However, underlying inflation remains broadly stable, while wages have yet to show a significant response to the energy shock. The central bank reiterated its data-dependent approach without committing to a predetermined interest rate path.

Meanwhile, Eurozone economic data painted a mixed picture earlier in the day. The European Commission's Business Climate Indicator improved to 0.09 in October from -0.05 in September, entering positive territory for the first time in three years. However, Consumer Confidence remained unchanged at -17.9, while the Economic Sentiment Indicator declined to 96.9, below expectations of 97.5.

The ECB Governing Council also announced that President Christine Lagarde will step down in February 2027, without providing details about her successor. Investors now turn their attention to Lagarde's press conference for further monetary policy guidance.

Across the Atlantic, the US Bureau of Economic Analysis (BEA) reported that the Personal Consumption Expenditures (PCE) Price Index rose 3.6% YoY in September, accelerating from 3.4% in August. Monthly inflation increased 0.5%, while the Core PCE Price Index rose 3.1% annually, up from 3% previously.

These figures follow Wednesday's Federal Open Market Committee (FOMC) decision to maintain interest rates at 3.75%-4.00%, with a 10-2 vote. Two policymakers favored a 25-basis-point increase, while Federal Reserve (Fed) Chair Kevin Warsh reiterated his commitment to restoring price stability.

Further supporting the Greenback, US Gross Domestic Product (GDP) expanded at an annualized rate of 3.4% in the third quarter, above expectations of 3.2%. Meanwhile, Initial Jobless Claims declined to 194K, below forecasts of 199K, confirming the resilience of the labor market.

Persistent inflation and solid economic activity reinforce expectations of further Fed tightening, with the CME FedWatch tool indicating an 83% chance of a rate hike in December.

EUR/USD technical analysis

Chart Analysis EUR/USD

In the four-hour chart, EUR/USD trades at 1.1130, keeping a bearish near-term bias as it holds under the 100-period simple moving average (SMA) at 1.1196 and the 200-period SMA at 1.1293. The pair remains pressured by the broader downward trend line referenced around 1.1254, while the Relative Strength Index (14) slips toward the lower mid-range near 36, which hints at persistent selling interest without yet reaching oversold extremes.

On the downside, immediate support emerges at the horizontal level around 1.1105, ahead of a deeper floor near 1.1050, where sellers could start to book profits. On the topside, a recovery would first face resistance at the 100-period SMA at 1.1196, with the descending trend-line region near 1.1254 and the 200-period SMA at 1.1293 likely to cap any extended rebound while the bearish structure remains intact.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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