Euro attempts to recover losses after prolonged decline
On the morning of Wednesday, October 21, 2026, the euro is trading near the 1.1230 dollar mark. The European currency is trying to strengthen after previous fluctuations, but political instability in France and rising energy prices continue to pose risks for the euro. At the same time, the dollar is losing some support amid falling U.S. bond yields and shifting investor sentiment.
What happened in the currency market on October 20
On Tuesday, several key factors influenced the EUR/USD dynamics:
- Dollar weakening. The U.S. currency index fell by about 0.2–0.25%. The dollar was pressured by declining U.S. Treasury yields and fluctuations in oil prices amid news of possible diplomatic contacts regarding the conflict with Iran; - Political crisis in France. Mass protests, difficulties with the 2027 budget, and rising yields on French government bonds are increasing investor concerns about the country's financial stability. This limits the euro's strengthening potential; - Weak economic signals from the Eurozone. Data on business sentiment in Germany came in worse than expected, further dampening demand for the European currency.
By the end of trading, the euro still received slight support: the EUR/USD pair added about 0.2% and approached the 1.124 dollar mark. However, during the previous week the rate had dropped to a minimum around 1.1112 dollars — the lowest level in 17 months.
What to expect from the euro on October 21
On Wednesday, investors will continue to monitor three factors: the situation in France, oil price dynamics, and U.S. bond yields. Additional attention will be drawn to speeches by central bank representatives and economic statistics.
In the Eurozone, Eurostat's calendar for October 21 includes the publication of data on government deficit and debt for 2025, as well as quarterly debt and deficit figures for the second quarter of 2026. These data may affect the assessment of the region's financial stability, although the market's immediate reaction will depend on the content of the reports and investors' expectations.
In the U.S., the dynamics of Treasury yields will remain an important factor. If they continue to decline, the dollar may come under additional pressure, supporting EUR/USD. However, a deterioration in the geopolitical situation could again increase demand for the U.S. currency as a safe-haven asset.
EUR/USD exchange rate forecast
As of the morning of October 21, the baseline scenario appears to be euro consolidation in the 1.12–1.13 dollar range with the possibility of moderate recovery if the American currency weakens further.
Positive scenario for the euro: falling U.S. bond yields, further cheapening of oil, and reduced political tensions in Europe could push the pair toward the 1.1250–1.1300 marks.
Negative scenario: new escalations in France, worsening conditions in energy markets, or increased demand for the dollar could bring EUR/USD back to the 1.1150–1.1200 area.
These are indicative scenarios, not guaranteed levels of market movement.
Overall, the euro has a chance for a short-term bounce, but it is too early to talk about a full-fledged reversal. For a sustainable strengthening of the European currency, not only dollar weakness is needed, but also a reduction in concerns about French public finances and the Eurozone's economic prospects.
