Why has the euro hit a 17-month low as ECB keeps rates unchanged and US PCE inflation quickens?

• Can EUR/USD Recover as a Stronger US Dollar Pushes It to a Fresh 17-Month Low of 1.1105?
• Despite lingering inflation risks, the European Central Bank left interest rates unchanged.
• Expectations of a December Fed rate hike strengthen as US growth remains robust and inflation gathers pace.

Selling pressure on the Euro (EUR) deepens on Thursday as persistent inflation and resilient US economic growth underpin the US Dollar (USD). EUR/USD has extended its losses to a fresh 17-month low of 1.1105, its weakest since May 2025. At the time of writing, the pair is trading near 1.1120, a decline of 0.28% on the day.

Following its October monetary policy meeting, the European Central Bank (ECB) confirmed on Thursday that key interest rates would stay unchanged, as expected. Rates on the main refinancing operations, marginal lending facility and deposit facility stand at 2.65%, 2.90% and 2.50%, respectively.

Higher energy prices could lift inflation and weigh on economic growth, the ECB cautioned. Underlying inflation, however, is broadly steady, and wages have not yet responded significantly to the energy shock. Reaffirming that decisions would depend on incoming data, the central bank avoided committing to a preset interest rate trajectory.

Earlier releases offered a mixed assessment of the Eurozone economy. October's Business Climate Indicator from the European Commission rose to 0.09 from September's -0.05, moving above zero for the first time in three years. By contrast, the Economic Sentiment Indicator slipped to 96.9 against expectations of 97.5, while Consumer Confidence held at -17.9.

Attention now shifts to Lagarde's press conference for additional guidance on monetary policy. The ECB Governing Council also confirmed that President Christine Lagarde would leave her post in February 2027, but gave no details on her successor.

In the US, September's Personal Consumption Expenditures (PCE) Price Index increased 3.6% YoY, compared with 3.4% in August, according to the US Bureau of Economic Analysis (BEA). Inflation rose 0.5% on a monthly basis. The annual increase in the Core PCE Price Index also picked up, reaching 3.1% from 3% previously.

The inflation readings come after the Federal Open Market Committee (FOMC) voted 10-2 on Wednesday to leave interest rates at 3.75%-4.00%. A 25-basis-point rise was favoured by two policymakers, while Federal Reserve (Fed) Chair Kevin Warsh reaffirmed his commitment to restoring price stability.

The Greenback received further support from US Gross Domestic Product (GDP), which grew at an annualised rate of 3.4% in the third quarter, exceeding the 3.2% forecast. A fall in Initial Jobless Claims to 194K, against expectations of 199K, also confirmed continued labour market resilience.

With inflation remaining persistent and economic activity holding firm, expectations of additional Fed tightening have strengthened. The CME FedWatch tool puts the probability of a December rate hike at 83%.

EUR/USD technical analysis: Can support hold against selling pressure?

A near-term bearish bias persists on the four-hour chart, where EUR/USD is trading at 1.1130, below both the 100-period simple moving average (SMA) at 1.1196 and the 200-period SMA at 1.1293. Adding to the pressure is the broader descending trend line around 1.1254. Meanwhile, the Relative Strength Index (14) is edging towards the lower mid-range near 36, suggesting sustained selling interest, though it has not yet reached oversold extremes.

The horizontal level near 1.1105 provides immediate downside support, followed by a lower floor around 1.1050, where sellers may begin taking profits. Any recovery would initially encounter the 100-period SMA at 1.1196. Beyond that, the descending trend-line area near 1.1254 and the 200-period SMA at 1.1293 are likely to limit an extended rebound as long as the bearish structure holds.

(An AI tool assisted in preparing the technical analysis for this story. Find out more.)