The EUR/USD currency pair rebounded during American trading hours on Thursday, recovering from an intraday low of 1.1171 to trade around 1.1202, as a pullback in US Treasury yields tempered the US Dollar's momentum. Despite this recovery, the Euro remains near the 17-month low touched earlier in the week, pressured by France's fiscal concerns and ongoing US Dollar strength [1]. The US Dollar Index (DXY) traded around 102.24, slightly below Monday's peak of 102.53, which was its highest level since April 2025. The benchmark 10-year US Treasury yield eased toward 5.28% after reaching 5.36% on Wednesday, its highest since 2002 [1].
Oil prices rebounded sharply, with West Texas Intermediate (WTI) gaining over 3% following reports that the Pentagon has ordered preparations for possible renewed strikes on Iran. This escalation risk has raised concerns that energy prices could remain elevated, complicating efforts by both the Federal Reserve (Fed) and the European Central Bank (ECB) to bring inflation back to their 2% targets and increasing pressure to maintain tight monetary policy [1].
Minutes from the Fed's September meeting, released Wednesday, indicated that officials acknowledged persistent inflation, a labor market near maximum employment, and solid economic growth. Most participants considered another rate increase likely appropriate by year-end, with the CME FedWatch Tool placing the odds of a December hike at around 86% [1]. On the European side, the ECB's September meeting account revealed that policymakers viewed the outlook as highly uncertain and dependent on geopolitical developments, with upside risks to inflation and downside risks to growth. Updated staff projections suggested inflation would remain well above target for an extended period, and officials emphasized that future decisions should be data-dependent without committing to a specific rate path [1].
A Reuters poll conducted October 5-8 found that 70 of 73 economists expect the ECB to hold its deposit rate at 2.50% on October 29, while 64 of 73 anticipate a 25-basis-point hike in December [1]. The US Dollar was the strongest against the Australian Dollar among major currencies today [1].
CONCLUSION
The Euro's modest rebound reflects a temporary easing in US yields, but persistent inflation risks and expectations of further rate hikes by the Fed and possibly the ECB continue to weigh on the currency. Market participants remain focused on central bank signals and geopolitical developments, which are likely to drive volatility in the near term.