The euro took a heavy hit against the dollar on Thursday as a stronger-than-expected U.S. CPI report reignited bets that the Federal Reserve will keep interest rates higher for longer.
Traders were caught off-guard when the CPI data showed inflation heating up again, hinting that the Fed’s job of taming prices is far from done. The immediate reaction was a surge in the U.S. dollar, while risk assets and major peers like the euro lost ground fast.
EUR/USD plunged sharply, breaking below key technical support levels as investors rushed to reposition for a more hawkish Fed outlook.
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Hot CPI print: Markets now doubt the timing of future rate cuts, with many pushing expectations further into 2026.
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Policy divergence: The Fed looks set to stay firm, while the ECB continues to signal caution amid weak eurozone growth.
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Result: Capital flows favor the dollar, leaving the euro vulnerable to deeper corrections in the short term.
Technically, EUR/USD could face further downside if it fails to hold above the 1.15–1.16 range. Momentum indicators still point to bearish pressure, and traders are now watching the upcoming Fed meeting minutes and eurozone PMI data for the next clues.
In short, the market mood has flipped — and the dollar’s comeback after the CPI surprise has reminded everyone that inflation isn’t done with us yet.
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