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Euro Slips to $1.117 Before ECB Rate Decision
Why is the euro down today?
The euro (EUR/USD) slipped to about $1.117 on Tuesday as traders waited for Thursday's ECB decision, with a December rate-hike about 75% priced in and Lagarde's tone in focus.
Key numbers
| ECB deposit rate | 2.50%Raised from 2.25% on Sep 16 |
|---|---|
| December hike priced in | ~75%Move to 2.75% (MUFG: about 20bp priced) [4] |
| Economists expecting December hike | 64 of 73Reuters poll |
| Euro-area inflation (Sep) | 3.8%Up from 3.2% in August |
| Euro-area energy inflation (Sep) | 18.8%Up from 14.3% in August |
| EUR/USD | 1.1170Extending declines below 1.12 |
What happened
The euro (EUR/USD) slipped to about $1.117 on Tuesday as traders waited for Thursday's ECB decision, with a December rate-hike about 75% priced in and Lagarde's tone in focus. The European Central Bank (ECB) is expected to hold its deposit rate, which sets what banks earn on spare cash, at 2.50% after hikes in June and September. Euro-area inflation reached 3.8% in September, nearly double the ECB's 2% goal, as energy costs rose 18.8% from a year earlier. Economists polled by Reuters mostly expect a quarter-point increase to 2.75% in December.
Why it matters
The euro could move sharply on Thursday because traders are watching whether ECB President Christine Lagarde confirms or plays down a December rate hike. Higher interest rates usually make a currency more attractive, while a softer tone can weaken it. Rates also set borrowing costs for European homes and firms, and energy-driven inflation is why more hikes are on the table.
Who this affects
- MarketmixedMedium impact
- Euro traders face a close call on Lagarde's tone.
- CompanyneutralMedium impact
- ECB must balance 3.8% inflation against tighter financial conditions.
- CompetitorsneutralLow impact
- Fed and Bank of Japan also expected to hold rates.
- IndustrybearishMedium impact
- Eurozone borrowers face higher loan costs if December hike arrives.
European Central Bank vs Federal Reserve, Bank of Japan
| European Central BankEUR | 2.50% | Oct 29 | Hold |
|---|---|---|---|
| Federal ReserveUSD | 3.75-4.00% | Oct 28 | Hold |
| Bank of JapanJPY | 1.25% | Oct 30 | Hold |
As of 2026-10-27
How we got here
First ECB hike since 2023 takes effect, lifting deposit rate to 2.25% from 2.00%.
Second hike takes effect, lifting deposit rate to 2.50%.
Eurostat flash estimate puts September euro-area inflation at 3.8%, up from 3.2%.
EUR/USD trades near 1.117 as traders await Fed and ECB decisions.
What to watch
- Fed decision on its 3.75-4.00% range, a day before the ECB, may move EUR/USD.2026-10-28
- Lagarde's press-conference tone on a December hike, plus any comment on France's bond turmoil.2026-10-29
- Friday's data release, flagged as crucial for repricing December hike expectations.2026-10-30
Educational content only. Not investment advice.
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