Title: EUR/USD Plunges to Three-Month Low as Hawkish Fed Spurs Dollar Strength
Author: Adapted from original reporting by FXStreet’s Anirudh Vashisht
The Euro to US Dollar exchange rate (EUR/USD) has dropped sharply to its lowest level in over three months, driven primarily by a stronger US Dollar fueled by hawkish comments from the U.S. Federal Reserve. As of late trading on Thursday, October 31, 2025, the currency pair had fallen below the 1.0520 mark — a level unseen since July 2025.
Several macroeconomic and central bank-driven developments contributed to the Euro’s recent slide and the US Dollar’s notable rally. The financial markets’ reaction to the Federal Reserve’s latest policy stance has shifted investor sentiment decisively toward the US Dollar, increasing demand for the greenback and exerting pressure on other currencies, notably the Euro.
Key Highlights
– EUR/USD fell to 1.0515 during Thursday’s US session, marking its lowest point since mid-July.
– The US Dollar Index (DXY), which tracks the USD against six major currencies, surged past the 107.00 level amid rising yields and market confidence in prolonged higher US interest rates.
– The Federal Reserve maintained its interest rates between 5.25 percent and 5.50 percent but reinforced its commitment to a tight monetary policy in the near to medium term.
– Market participants are now beginning to price in a longer timeline before potential rate cuts from the Fed, pushing back against earlier expectations of a dovish pivot in early 2026.
– In contrast, the European Central Bank’s (ECB) cautious tone on future tightening, amid slowing growth in the Eurozone, has limited bullish momentum for the Euro.
Federal Reserve’s Hawkish Stance Boosts the Dollar
On October 30, 2025, the Federal Reserve concluded its FOMC (Federal Open Market Committee) meeting by deciding to hold rates steady. However, Chair Jerome Powell’s post-meeting remarks and the official statement provided clear signals that the central bank is not yet ready to ease monetary restrictions. According to Powell, “The process of getting inflation securely back to 2 percent has a long way to go.”
This comment and the general tone of the statement led markets to believe that not only is the Fed likely to maintain current rate levels longer than previously anticipated, but that further tightening remains a distinct possibility if inflation does not continue to trend downward.
As a result, US Treasury yields across the curve rose significantly:
– The 10-year U.S. Treasury yield hit 4.92 percent
– The 2-year Treasury yield climbed to 5.03 percent
These upward pressures on yields made US-denominated assets more attractive, particularly as global investors search for better returns. The net effect has been a broad-based rally for the US Dollar, lifting the Dollar Index and pushing EUR/USD lower as capital flowed into dollar holdings.
Economic Data Supports the Dollar
Beyond central bank rhetoric, recent US economic data has continued to paint a strong picture of the US economy, further justifying the Fed’s aggressive posture.
Notable data supporting the USD includes:
– US GDP growth for Q3 2025 exceeded forecasts, expanding at an annualized pace of 2.6 percent, versus expectations of 2.2 percent.
– U.S. labor market remains resilient, with weekly initial jobless claims hovering near 210,000 (below the four-week average). The October nonfarm payroll report is also expected to show continued employment growth, adding to the Fed’s case to keep rates higher.
– Consumer spending, another key driver of US GDP, rose by 0.5 percent in September, underscoring the economy’s resilience against rising borrowing costs.
European Economic Data Disappoints
On the other side of the Atlantic, the Eurozone continues to struggle with lackluster economic growth and stagnating business activity. The bloc’s economy
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