Euro recovers yesterday's drop on US inflation data

The euro demonstrated noticeable fluctuations on the FOREX currency market. On Wednesday, the European currency dropped to 1.1113 dollars after the release of American inflation data. However, already during the Asian session on Thursday, October 15, EUR/USD quotes fully recovered previous losses and rose to 1.1241 dollars.

The sharp reversal shows how sensitive the currency market remains to US macroeconomic statistics and expectations regarding further actions of the Federal Reserve System (Fed).

Why did the euro first fall and then recover

The main reason for the initial decline was US inflation data for September. Consumer prices rose by 3.7% year-on-year against 3.4% in August, exceeding market expectations. Core inflation, excluding food and energy, amounted to 2.6% for the year.

These figures strengthened concerns that the Fed may maintain a tight monetary policy longer or even raise interest rates. This supported the dollar and provoked a decline in EUR/USD.

However, market sentiment then changed. On Thursday, the dollar began to lose ground after cautious comments from Fed representatives, and the decline in yields on American government bonds further weakened demand for the American currency. As a result, the euro recovered after the sharp decline.

What to expect next

In the near term, the dynamics of the euro will depend primarily on new economic data from the US and signals from the Fed regarding interest rates. If inflationary pressure remains high, the dollar may strengthen again. Conversely, easing expectations for US monetary policy could support further recovery of the euro.

At the same time, the sharp rise of EUR/USD to 1.1241 dollars does not yet guarantee a stable trend reversal. Investors should consider that the market remains sensitive to macroeconomic releases, and fluctuations in the currency pair may continue.