Euro Sinks to Its Lowest ECB Reference Rate Since July as the Fed Gap Stands Still
The European Central Bank’s euro reference rate fell to 1.1411 dollars on 23 September, its lowest since 29 July, when it stood at 1.1380. At 14:30 GMT the single currency traded at 1.1388 dollars, down 0.52 percent on the day. The fall came one week after the Federal Reserve raised rates by a quarter point, the same day an equal ECB increase took effect.
Two hikes, one unchanged gap
The ECB raised its three key rates by 25 basis points on 10 September, taking the deposit rate to 2.50 percent from 16 September. On 16 September the Fed raised its target range by the same quarter point, to 3.75 to 4 percent, on a 12 to 0 vote. On our calculation, the gap between the midpoint of the Fed range and the ECB deposit rate is 1.375 percentage points. That is exactly where it stood before either move, when the midpoint was 3.625 percent and the deposit rate 2.25 percent.
The policy gap did not move, but the euro did. On our calculation, the reference rate has fallen 1.09 percent since 16 September, the day the ECB increase took effect and the Fed announced its own. The largest single fall came on 17 September, the day after the Fed decision, at 0.49 percent. Options traders added bets on further euro weakness after the Fed’s increase, and their positioning into year end is near levels last seen in mid August, per Bloomberg.
| Date | Dollars per euro | Daily change |
|---|---|---|
| 16 September | $1.1537 | -0.02% |
| 17 September | $1.1481 | -0.49% |
| 18 September | $1.1460 | -0.18% |
| 21 September | $1.1490 | +0.26% |
| 22 September | $1.1463 | -0.23% |
| 23 September | $1.1411 | -0.45% |
ECB euro reference rates. Daily changes are our calculation, each against the previous reference rate; 16 September is measured against 1.1539 on 15 September.
Where the euro sits in 2026
| Reference point | Dollars per euro | 23 September against it |
|---|---|---|
| 28 January, 2026 high | $1.1974 | -4.70% |
| 31 December 2025 | $1.1750 | -2.89% |
| 24 June, 2026 low | $1.1340 | +0.63% |
| 29 July | $1.1380 | +0.27% |
| 21 August | $1.1699 | -2.46% |
Reference rates as above. Changes are our calculation against the 23 September reference rate of 1.1411.
On our calculation, the euro has given back 288 pips since 21 August, its highest reference rate after the 24 June low, erasing about 80 percent of the 359 pip climb between the two.
The intraday picture
| Instrument | Level | Change |
|---|---|---|
| Euro/dollar | $1.1388 | -0.52% |
| US Dollar Index | 101.08 | +0.48% |
Intraday quotes captured at 14:30 GMT, CNBC data. Changes are against the previous close of 1.1447 and 100.601.
Up to 14:30 GMT the euro traded between 1.1384 and 1.1452 dollars, so it sat 4 pips above the bottom of a 68 pip range, on our calculation.
Why it matters: ECB staff see headline inflation at 3.0 percent in 2026 and 2.5 percent in 2027. On 10 September the Governing Council said conflict in the Middle East continues to generate inflation pressures and that inflation is set to remain well above target for an extended period. On our reading, a weaker euro raises the euro price of goods and commodities bought in dollars, and how much of that reaches consumer prices depends on how far the currency falls and how long the weakness lasts.
Outlook: The two central banks decide next within a day of each other: the FOMC meets on 27 and 28 October and the ECB Governing Council on 28 and 29 October. Unless either bank moves before then, the policy gap stays at 1.375 percentage points on our calculation. On our reading, the daily ECB reference rate is the clearest gauge of how much of the euro’s summer recovery survives until then.
Sources: European Central Bank, Federal Reserve, CNBC, Bloomberg.
