The euro edged lower against the US dollar on Tuesday, trading around $1.163, as confidence returned to the greenback following a week of market turbulence. The US dollar has recovered from its earlier slump, now only 0.7% below its October 10 peak, as volatility eased after banking sector concerns subsided.
Analysts noted that the dollar’s rebound comes as investors gradually restore faith in US economic stability, reducing gold’s short-lived appeal as a safe-haven asset. The dollar’s earlier weakness had been attributed to investor anxiety over trade policy uncertainty and a broader global de-dollarisation trend.
Currency strategists at ING predicted that the EUR/USD pair could test the 1.160 level in the coming days, depending on upcoming US inflation data. A hotter-than-expected Consumer Price Index (CPI) reading could further strengthen the dollar and extend the euro’s decline.
The European Central Bank (ECB) enters its pre-meeting blackout period on Thursday, ahead of its rate-setting session next week. Market sentiment now reflects a lower probability of further rate cuts, given the eurozone’s relative economic stability and inflation hovering near the 2% target.
While the ECB has already reduced interest rates by two percentage points since early 2025, policymakers remain cautious about additional easing. Meanwhile, markets anticipate that the US Federal Reserve may introduce two rate cuts by year-end, depending on inflation and labor market trends.
The euro’s decline was also influenced by improving signals from US–China trade talks, with Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng expected to meet in Malaysia to avert further tariff escalation — an issue US President Donald Trump has described as “unsustainable.”
ING’s FX analyst Francesco Pesole said the euro’s performance remains largely tied to shifts in US equity and credit markets. “Further stabilization could push EUR/USD toward 1.160, but deeper declines would be difficult to justify unless Friday’s CPI print surprises to the upside,” he added.
Meanwhile, ECB policymakers Isabel Schnabel of Austria and Joachim Nagel of Germany reiterated the need to bolster the international role of the euro, though analysts believe a stronger currency may not be universally welcomed within the Governing Council. Despite occasional discussions, direct interventions in the foreign exchange market remain unlikely in the near term.
