On 7 October 2026, one euro cost $1.1177, according to the European Central Bank's daily reference rate. That was the euro's lowest price in dollars since May 2025. The price of a euro in US dollars is known as EUR/USD.
Much of the euro's fall this year lines up with one measure: the gap between US and German two-year government bond yields. Here is how that gap moves EUR/USD and how central bank decisions feed into it. We also show why the dollar can rise in a crisis, with each 2026 move dated.
What moves EUR/USD? EUR/USD is the price of one euro in US dollars. It moves with the gap between US and euro-area interest rates, which central bank decisions shift. Demand for dollars in a crisis can also push it down.
Since 2010, a bigger lead for US two-year government bond yields over German ones has gone with a weaker euro. German bonds stand in for euro rates. On month-end figures, the correlation is −0.77, on a scale from −1 to +1.
From 2 January to 2 October 2026, the US lead widened from 1.36 to 1.81 percentage points. Over the same days, EUR/USD fell from $1.1738 to $1.1259.
In a crisis, the dollar can rise even when rates favour the euro. From 9 to 20 March 2020, EUR/USD fell 6.5% while the US lead narrowed.
What is EUR/USD?
EUR/USD is the number of US dollars one euro buys. When it falls, the euro is weaker and the dollar stronger. We explain how currency quotes and spreads work in How Exchange Rates Work.
This guide uses two daily prices: the European Central Bank (ECB) reference rate and the New York noon rate.
Driver 1: the interest rate gap
Money tends to move towards higher returns. If US government bonds pay more than German ones, holding dollars earns more. That extra demand for dollars pushes EUR/USD down.
A bond's yield is the yearly return a buyer gets at today's price. Two-year yields track central bank rates closely, while reacting on the day to a rate decision or a data release. We explain yields of different lengths in What Is the Yield Curve?
The euro area has no single government bond. So German government bonds stand in for euro rates in this guide. The gap is the US yield minus the German one, in percentage points (points, for short).
US and German 2-year yields since 2010
Source: FRED (DGS2); Deutsche Bundesbank; YX Insights
The chart shows both two-year yields since January 2010. German two-year yields stayed below zero from August 2014 to April 2022.
On 2 October 2026, the US two-year yield was 4.83% and the German one 3.02%. The US lead was 1.81 points.
EUR/USD against the 2-year yield gap since 2010
Source: FRED (DEXUSEU, DGS2); Deutsche Bundesbank; YX Insights
Each dot is one month end, from January 2010 to September 2026, 201 in all. The further right a dot sits, the bigger the US lead. The lower it sits, the weaker the euro.
The dots slope down from left to right. That pattern is measured by correlation, which runs from −1 to +1. A value of −1 means two series always move in opposite directions in a straight line, while 0 means no link. For the gap and EUR/USD at month ends, it is −0.77.
The 2026 dots, for the January to September month ends, sit close together. Their gap ran from 1.17 to 1.64 points, while EUR/USD ran from $1.1345 to $1.1885. The gap has widened since, to 1.81 on 2 October.
The table measures the same link four ways, from month-end levels down to day-to-day changes.
What is compared, 4 January 2010 to 2 October 2026 | Correlation |
|---|---|
Gap level against EUR/USD level, month ends (January 2010 to September 2026) | −0.77 |
Change in the gap against % change in EUR/USD, month to month | −0.47 |
Change in the gap against % change in EUR/USD, week to week | −0.33 |
Change in the gap against % change in EUR/USD, day to day | −0.17 |
Source: FRED (DEXUSEU, DGS2); Deutsche Bundesbank; YX Insights
The link is strongest over long stretches. On daily changes, the correlation is only −0.17, so other forces often matter more on any one day.
Driver 2: ECB and Fed rate decisions
A rate decision moves EUR/USD mainly through the two-year yield. Bond prices move ahead of each decision as data and speeches arrive. So an expected change can already be in the yield by decision day, while a new path in officials' projections can move it. Three dates in 2026 show the range:
17 June: the US Federal Reserve (the Fed) held its Fed Funds Rate target range at 3.50% to 3.75%. Its officials' median projection for the end of 2026 rose to 3.8%, from 3.4% in March. By noon the next day, EUR/USD had fallen 1.1%, from $1.1593 to $1.1470.
10 September: the ECB raised its Deposit Facility Rate, the rate it pays banks on overnight deposits, by 0.25 points, to 2.50%. It had already raised it to 2.25% in June. EUR/USD barely moved: $1.1627 at noon the day before, $1.1629 at noon that day.
16 September: the Fed raised its range by 0.25 points, to 3.75% to 4%. It was the Fed's first rise since July 2023. The larger changes in projections were further out. Officials' median projection for the end of 2027 rose to 4.1%, from 3.6% in June. By noon the next day, EUR/USD had fallen 0.5%.
We explain how the Fed sets its range in How the Fed Sets Rates and its wider job in What Does the Fed Do?
Driver 3: the dollar in a crisis
In a crisis, demand for safe assets jumps. The dollar sits at the centre of world finance. In April 2025, it was on one side of 89% of all currency trades, according to the Bank for International Settlements.
March 2020 shows what can happen. From 9 to 20 March 2020, EUR/USD fell 6.5%, from $1.1420 to $1.0682. Over the same days, the US lead in two-year yields narrowed from 1.31 to 1.03 points. Rates pointed to a stronger euro, yet the dollar rose.
On 19 March 2020, the Fed opened dollar swap lines with nine more central banks. Swap lines let other central banks borrow dollars from the Fed. The Fed said they were "designed to help lessen strains in global U.S. dollar funding markets".
What moved EUR/USD in 2026
Source: FRED (DEXUSEU); YX Insights
The chart shows EUR/USD each day in 2026, up to 2 October. It peaked at $1.1980 on 27 January. Its three largest one-day falls came on 2 March, 18 June and 1 October.
The 2 March fall came as the war in the Middle East escalated. EUR/USD dropped 1.1% that day.
By 13 March, EUR/USD was $1.1444, down 3.2% from 27 February, while the gap rose only 0.02 points. Brent crude oil rose from $71.32 to $103.23 a barrel over the same days. We cover that oil shock in How the Oil Market Works.
CME Group, which runs the Chicago Mercantile Exchange, published a commentary on the move on 22 April 2026. It described the dollar's rise as "some flight-to-quality demand, layered on top of a rate differential story".
The 18 June fall came the day after the Fed's new projections.
Over the full period, the rate gap moved against the euro. From 2 January to 2 October, the US two-year yield went from 3.47% to 4.83%, while the German one went from 2.11% to 3.02%. So the gap grew from 1.36 to 1.81 points. EUR/USD fell 4.1%, from $1.1738 to $1.1259.
On the New York series, which runs to 2 October, the year's low came on 1 October, at $1.1232, after a 1.0% fall that day. The gap had narrowed by 0.07 points on the day. The ECB's reference rate has fallen further since, to $1.1177 on 7 October.
The next day, 2 October, the gap jumped 0.24 points, as the German yield fell 0.19 points. Yet EUR/USD edged up, to $1.1259. Both days show how loose the daily link is.
How to read EUR/USD price movements
Check the source and time. The ECB sets its reference rate at 2:15 pm Central European Time each working day. FRED, the St. Louis Fed's free database, carries the New York noon rate as series DEXUSEU and updates it weekly. On 1 October 2026, the ECB rate was $1.1298, while the New York rate was $1.1232.
Read the two-year gap alongside. On 6 October 2026, the US two-year yield was 4.79% and the German one 3.08%, a gap of 1.71 points.
Know the calendar. The Fed next decides on 28 October 2026. The ECB decides a day later, on 29 October.
EUR/USD moves with the gap between US and German two-year yields, which carries each ECB and Fed decision. In a crisis, demand for dollars can override that gap for weeks.
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Common questions about EUR/USD
Why is the euro falling against the dollar in 2026?
The euro's fall lines up most closely with the gap between US and German two-year government bond yields. From 2 January to 2 October 2026, the US yield went from 3.47% to 4.83%, while Germany's went from 2.11% to 3.02%. EUR/USD fell 4.1% over those days. The sharpest one-day drop came on 2 March, as war in the Middle East escalated.
Does the euro fall when the Fed raises rates?
Not always. It depends on how far the news differs from what bond prices already reflect. On 16 September 2026, the Fed raised its target range to 3.75% to 4%. Its officials also projected higher rates for 2027. EUR/USD fell 0.5% by noon the next day. When the ECB raised its rate on 10 September, the euro barely moved.
What is the EUR/USD exchange rate today?
EUR/USD changes every second while currency markets are open, so check a live quote for the current price. For a fixed daily figure, the European Central Bank publishes a reference rate each working day at 2:15 pm Central European Time. On 7 October 2026, it was $1.1177, the lowest since May 2025.
What is the highest EUR/USD has ever been?
The highest on the Fed's daily New York series is $1.6010, on 22 April 2008. The lowest is $0.8270, on 25 October 2000, less than two years after the euro launched. In 2026, up to 2 October, that series ranged from $1.1232 to $1.1980. The ECB's reference rate was lower still on 7 October, at $1.1177.
DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.