Euro Holds Near 1.1473 Against Dollar as Central Bank Policies Diverge
The European single currency traded at $1.1473 against the US dollar on Tuesday, with markets absorbing the latest moves from the world's two largest central banks. The exchange rate showed little net movement through the session, with spot prices oscillating between $1.1470 and $1.1479, according to market data.
The Japanese yen saw the euro change hands at 180.68, a modest gain of 0.14%.
The trading day follows a sharp repricing on Monday, when the euro fell approximately 0.12% to $1.1472 following the US Federal Reserve's decision to raise its benchmark interest rate.
What Is Driving The Exchange Rate?
The single currency has weakened 1.63% over the past month and 2.89% over the last year, reflecting a widening gap between US and European monetary policy. A primary factor is the Federal Reserve's September 16 decision to raise its target range for the federal funds rate by 25 basis points to 3.75%–4.00%, its first hike since 2023.
The Fed's move was unanimous and aimed at combating US inflation, which reached 3.4% in August. Projections from the Federal Open Market Committee suggest rates may finish the year around 4.1%.
In response, the European Central Bank (Banca Centrale Europea) raised its own key interest rates by 25 basis points on September 10, increasing the deposit facility rate to 2.50% — a move that took effect September 16.
The ECB cited renewed inflationary pressures from the conflict in the Middle East and higher energy prices as the reason for reversing a rate-cutting cycle that began in June 2024.
What Forecasts Suggest For The Months Ahead
Analysts anticipate continued volatility as markets weigh divergent growth prospects. Forecasts for the EUR/USD rate by the fourth quarter of 2026 range widely:
• J.P. Morgan Global Research projects the pair at 1.14 by December, citing a "hawkish" Federal Reserve and a resilient US labor market.
• Schroders expects the euro to weaken further to 1.10, pointing to the monetary policy gap.
• Monex USA and MUFG Research offer more euro-positive projections of 1.17 and 1.18 respectively.
The International Monetary Fund forecasts US growth at 2.4% for 2026, compared to just 0.9% for the Eurozone, a differential that tends to support the dollar. Both the IMF and the Organisation for Economic Co-operation and Development flag Middle East tensions and energy price shocks as the primary downside risks to their projections.
How This Affects Residents In Italy
For someone living in Italy, a weaker euro means imported goods — from electronics to fuel — cost more in euro terms. A rate near $1.147 means 100€ buys roughly $114.70, compared to approximately $116 at the start of September, when the euro stood at $1.1629.
Travelers to the United States will find their purchasing power reduced compared to earlier in the year. Conversely, the relatively stable trading range of recent days offers a predictable window for anyone needing to make dollar transfers or purchases in the coming days.
