The euro staged a rebound against the US dollar on Friday, October 30, 2026, as the European Central Bank's (ECB) signals of a potential December rate hike countered the greenback's recent strength. The ECB's decision to hold rates steady, coupled with Christine Lagarde's comments that high energy prices are not driving core inflation, boosted market confidence. The probability of a December rate hike surged from 80% to 88%, reversing the euro's bearish trend and pushing EUR/USD back to 1.12.
The US dollar's weakness was further exacerbated by a sell-off in Alphabet shares, which plummeted nearly 13% following disappointing earnings. This sell-off, the largest in the company's history, led to a loss of around $500 billion in market capitalization and drove investors toward safe-haven assets like the euro and the yen. The Swiss franc also strengthened sharply, though not as much as the yen.
The approaching US midterm elections added to the dollar's decline, as historical trends suggest a weakening of the greenback in such periods. However, Citigroup noted that any declines in the USD index would likely be short-lived due to impending Federal Reserve rate hikes. Meanwhile, the Bank of Japan maintained its overnight rate at 1.25% but announced that core inflation had reached its 2% target, with around 80% of experts expecting a rate hike in December.
The US economy showed robust growth in the third quarter, with a 3.4% year-over-year increase, while the Fed's preferred inflation gauge also impressed investors. Despite these positive indicators, the USD index retreated for the third consecutive day, falling below the 102 region, similar to earlier this month.