Euro Plummets Against US Dollar, Reaching Three-Month Low
The Euro’s exchange rate has experienced a further decline against the US Dollar, approaching its weakest position in almost three months.
According to Refinitiv data, as of Tuesday (29/09/2026) at 09:30 WIB, the EUR/USD exchange rate stood at $1.137 per euro, remaining stagnant. At the close of previous trading on Monday (28/09/2026), the euro weakened by 0.18% to $1.137, bringing it close to its lowest level in nearly three months.
The euro’s weakness is closely linked to statements made by European Central Bank (ECB) President Christine Lagarde regarding the direction of interest rate policy. Lagarde suggested that rising inflation in the eurozone should be met with a measured policy response.
Eurozone inflation has exceeded 3% and is expected to approach 4% by the end of the year, double the ECB’s target. However, this increase is primarily driven by surging oil and gas prices resulting from the US-Iran conflict. The ECB has not yet seen energy price increases spill over into wages or cause inflation to become more entrenched in the economy.
“We see inflation will be higher, but there are no signs that the increase is becoming entrenched. At this stage, we also see no evidence that energy prices are driving wage increases,” said Lagarde, as quoted by Reuters.
These remarks have dampened expectations for aggressive ECB interest rate hikes. Several economists predict that the ECB will hold interest rates steady at its meeting on 29 October and only resume hikes in December.
Pressure on the euro is also stemming from the strengthening US Dollar. The US Dollar Index (DXY) this morning stood at 101.2, approaching a two-month high. The DXY is also heading towards a 1.8% gain throughout September, marking its best monthly performance since June.
The US Dollar is gaining momentum from rising US government bond yields. The 10-year US Treasury yield has reached its highest level since 2007, while the 30-year yield has touched its highest position since 2004. The two-year yield is also approaching 5%, its highest level in over two years.
Rising oil prices have further bolstered expectations that US inflationary pressures will remain high. This situation opens the possibility for the US Federal Reserve to raise interest rates again. Markets now estimate the probability of a Fed rate hike at the end of October at over 70%, up from 57% a week earlier. Investors are now awaiting US PCE inflation data on Wednesday and labour reports on Friday for further clues regarding the Fed’s interest rate trajectory.