Euro trims losses amid a softer USD, with upside attempts likely to remain shallow

The euro clawed back part of its recent losses against the US dollar on Tuesday, with EUR/USD retracing Monday's decline and returning to levels close to 1.1200 after trading at 17-month lows near 1.1150, according to FXStreet's daily currency coverage.

FXStreet characterises the move as a product of US dollar weakness rather than any intrinsic improvement in the euro's own fundamentals. The single currency showed only moderate gains on the session, and the analysis flags two drags that are expected to keep any euro rallies shallow: France's debt situation and concerns about the economic impact of high oil prices on the euro area, which is a large net energy importer.

The backdrop for the pair remains a broadly firm dollar. In related FXStreet market commentary published the same day, the US dollar was described as retaining a bullish undertone near its highest level since April 2025, supported by energy-driven inflation risks that have kept bets on a December Federal Reserve rate hike on the table, as well as by geopolitical risk premium flowing into the currency as a traditional safe haven. That combination has left the euro on the back foot for much of the recent period, and Tuesday's bounce followed a drop to the lowest EUR/USD levels in 17 months.

On the US policy side, FXStreet notes that Cleveland Fed President Beth Hammack reiterated her call for higher interest rates, while investors wait for inflation data due later in the week. Those releases are the main scheduled catalyst on the calendar for dollar pairs, and market participants are expected to treat them as a test of how firmly the case for tighter policy is building.

Elsewhere in the foreign-exchange complex, the Japanese yen has been an outlier against the general pattern of dollar strength. FXStreet reported that USD/JPY extended a retreat below 158.50 as intervention risks loom, with speculation that Japanese authorities could step in to support the currency weighing on the pair. In commentary carried by FXStreet, MUFG said the heightened risk of further intervention from Japan to support the yen is still helping to curtail upside for USD/JPY even as the US dollar continues to strengthen against other major currencies. The bank also noted that Bank of Japan Governor Kazuo Ueda spoke overnight in parliament, where he said underlying inflation is very close to the central bank's goal and stressed the importance of the price trend around 2.0%. On FXStreet's cross-currency performance table for the day, the euro was the weakest major against the yen.

Gold, which often trades inversely to the dollar, has been caught between the same forces. FXStreet described gold as retaining a mildly positive bias while remaining capped below the $4,200 mark and the top boundary of a two-week-old trading range, with a hawkish Fed offsetting the softer dollar. Fortune's daily precious-metals snapshot put gold at $4,182 per ounce at 9 a.m. Eastern Time on October 13, a $19 gain from the same hour the previous day and $104 higher than a year earlier.

For now, the euro's recovery looks tied to the dollar's own momentum and to this week's US inflation prints, rather than to any shift in the euro area's fiscal or energy picture. This article is for information only and is not investment advice.

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