Euro

Updated 2026-10-22

Summary

The euro is the currency of the euro area: 21 EU countries since Bulgaria joined on 2026-01-01, used by about 358 million people, per the ECB. The European Central Bank (ECB) and the national central banks of the Eurosystem issue it and set one monetary policy for all members, while each government runs its own budget. The euro is the world's second currency after the US dollar. Central banks held 20.6% of reported foreign exchange reserves in euro in Q2 2026, against 56.7% in dollars, per IMF COFER. It floats freely. The ECB publishes daily euro reference rates for some 30 currencies at around 16:00 CET, for information only. On 2026-10-22 one euro bought 1.1205 US dollars, 175.97 yen and 0.8377 pounds. Because the euro area imports most of its oil and gas, the euro's dollar value feeds directly into energy prices at home.

Key numbers

Euro reference rates (USD / JPY / GBP / CHF / CNY per euro), 16:00 CET: 1.1205 / 175.97 / 0.8377 / 0.9211 / 7.4786 (as of 2026-10-22). Source: ecb.europa.eu

EUR/USD high and low, 1 July-22 October 2026 (ECB reference): 1.1699 (21 Aug) / 1.1177 (7 Oct) (as of 2026-10-22). Source: ecb.europa.eu

EUR/USD annual average 2025 (2024): 1.1306 (1.0820) dollars per euro (as of 2025-12-31). Source: federalreserve.gov

ECB deposit / MRO / marginal lending rate: 2.50% / 2.65% / 2.90% (as of 2026-09-16). Source: ecb.europa.eu

Fed funds target range (rate gap reference): 3.75%-4.00% (as of 2026-09-16). Source: federalreserve.gov

Euro short-term rate (€STR): 2.440% (as of 2026-10-21). Source: ecb.europa.eu

Euro area HICP, September 2026 (energy; ex energy, food, alcohol, tobacco): 3.8% (18.9%; 2.5%) (as of 2026-10-16). Source: ec.europa.eu

Euro area deficit / debt, 2025 (EA20; EA21 debt 87.3%): 3.0% / 87.7% of GDP (as of 2026-10-21). Source: ec.europa.eu

Euro area (EA21) government debt, Q2 2026: 88.8% of GDP (as of 2026-06-30). Source: ec.europa.eu

Euro share of allocated FX reserves (IMF COFER, current rates): 20.60% (USD 56.70%) (as of 2026-06-30). Source: data.imf.org

Euro share of FX reserves at constant rates; gold vs euro share of total reserves (ECB): 20.2%; gold 27% vs euro 15% (as of 2025-12-31). Source: ecb.europa.eu

Euro banknotes in circulation (Eurosystem): EUR 1,633.4 billion (as of 2026-10-09). Source: ecb.europa.eu

Timeline

2026-10-22 — ECB reference rate: one euro buys 1.1205 dollars, down from 1.1616 on 10 September. (Source: ecb.europa.eu)

2026-10-21 — Eurostat: euro area deficit 3.0% and debt 87.7% of GDP in 2025 (EA20); EA21 debt 88.8% in Q2 2026. (Source: ec.europa.eu)

2026-10-21 — Lane: EUREP lines of up to EUR 50 billion per central bank; drawings possible from Q4 2026. (Source: ecb.europa.eu)

2026-10-17 — Lagarde at the IMFC: the energy shock is too large to look through; EUREP reinforces the euro's international role. (Source: ecb.europa.eu)

2026-10-16 — Eurostat confirms September inflation at 3.8%, energy 18.9%. (Source: ec.europa.eu)

2026-10-08 — ECB account: the euro rose 1.9% against the dollar between the July and September meetings; markets priced 84 bp more hikes. (Source: ecb.europa.eu)

2026-10-07 — EUR/USD reference rate 1.1177, the low of the ECB's July-October table. (Source: ecb.europa.eu)

2026-10-06 — Cipollone: digital euro trilogues under way; pilot from H2 2027; potential first issuance in 2029. (Source: ecb.europa.eu)

2026-10-02 — Eurostat flash: euro area inflation estimated at 3.8% in September, up from 3.2%. (Source: ec.europa.eu)

2026-09-30 — IMF COFER: the euro's share of allocated FX reserves rises to 20.60% in Q2 2026. (Source: data.imf.org)

2026-09-16 — Fed raises its range to 3.75%-4.00%; the ECB's 2.50% deposit rate takes effect the same day. (Source: federalreserve.gov)

2026-09-10 — ECB raises rates 25 bp for the second time in 2026, citing the Middle East conflict; TPI 'available'. (Source: ecb.europa.eu)

2026-08-21 — EUR/USD reference rate 1.1699, the high of the ECB's July-October table. (Source: ecb.europa.eu)

2026-07-10 — Council opens an excessive deficit procedure for Bulgaria, the euro area's newest member. (Source: consilium.europa.eu)

2026-06-17 — First ECB hike of the cycle takes effect: deposit rate 2.25%, from 2.00%. (Source: ecb.europa.eu)

2026-06-02 — ECB report: the euro's international role increased moderately in 2025, to around 20%. (Source: ecb.europa.eu)

2026-02-14 — ECB opens EUREP repo access in principle to all central banks, from Q3 2026. (Source: ecb.europa.eu)

2026-01-01 — Bulgaria adopts the euro at 1.95583 lev per euro; the euro area has 21 members. (Source: ecb.europa.eu)

2025-12-19 — Council of the EU agrees its position on the digital euro and on cash. (Source: consilium.europa.eu)

2025-07-08 — EU Council approves Bulgaria's euro adoption from 2026-01-01. (Source: ecb.europa.eu)

Key actors and links

ECB (actor:ecb): Issues the euro with the national central banks and sets euro area policy; deposit rate 2.50% since 2026-09-16.

Christine Lagarde (actor:christine-lagarde): ECB President; says the energy shock is too large to look through and wants the digital euro law voted by year-end.

European Union (actor:european-union): EU co-legislators decide the digital euro law; the Council and Parliament are in trilogue talks.

Federal Reserve (actor:federal-reserve): Sets the dollar side of EUR/USD; raised its range to 3.75%-4.00% on 2026-09-16.

US dollar (asset:usd): The euro's main counter-currency and its rival as a reserve asset: 56.70% of reserves versus 20.60% (Q2 2026).

FX (market:fx): EUR/USD is the euro's main traded pair; 1.1205 on the ECB reference rate of 2026-10-22.

Bulgaria (country:bulgaria): Became the 21st euro member on 2026-01-01; placed under an excessive deficit procedure on 2026-07-10.

France (country:france): Deficit 5.1% and debt 115.7% of GDP in 2025; under an EDP, which bears on TPI eligibility.

Italy (country:italy): Debt 136.7% of GDP in 2025; under an EDP; the second-highest debt ratio in the euro area after Greece.

Sovereign debt burden (theme:sovereign-debt): Euro area debt rose to 87.7% of GDP in 2025 (EA20) and 88.8% in Q2 2026 (EA21).

European fiscal pressure (theme:european-fiscal-pressure): Eleven EU states ran deficits of 3% or more in 2025, testing the fiscal rules behind the TPI.

CBDC (theme:cbdc): The digital euro is the euro's planned retail CBDC; possible first issuance in 2029 if the law passes.

Reserve Diversification (theme:reserve-diversification): Reserve managers are adding euro and gold; the ECB wants more euro safe assets and wider EUREP access.

Gold (commodity:gold): Gold reached 27% of total official reserves at end-2025, above the euro's 15% on that basis.

Energy shock (theme:energy-shock): Energy inflation of 18.9% in September 2026 lifted euro area HICP and weighs on the euro's terms of trade.

Why it matters now

The euro is caught between an energy shock and a rate cycle. The 2026 Middle East war lifted euro area energy inflation to 18.9% in September, and headline inflation to 3.8%, per Eurostat. The ECB answered with two 25 bp hikes. Its deposit rate has been 2.50% since 2026-09-16. The Fed also hiked, to 3.75%-4.00%, on the same day. The euro reached 1.1699 dollars on 2026-08-21, the high of the ECB's July-October table. It then fell to 1.1177 on 2026-10-07 and was 1.1205 on 2026-10-22, still near its 2025 average of 1.1306 (Fed G.5A). The mechanism, as AA reads it: higher oil and gas prices worsen the euro area's terms of trade, because it pays more for imports priced in dollars. That weighs on the euro unless the ECB is expected to tighten more than the Fed. In September, markets priced 84 bp of further ECB hikes by end-2027, per the ECB's own account.

Fiscal strain is the second channel. Eurostat said on 2026-10-21 that the euro area deficit stayed at 3.0% of GDP in 2025 and debt rose to 87.7% (EA20; 87.3% with Bulgaria). EA21 debt reached 88.8% in Q2 2026. France ran a 5.1% deficit, and France, Italy, Belgium and Bulgaria are all under an excessive deficit procedure. That matters because compliance with EU fiscal rules is the first criterion for the ECB's Transmission Protection Instrument (TPI), its backstop against disorderly bond spreads. The ECB says the TPI 'is available'. Lagarde declined to comment on widening spreads in September.

Third, the euro's global role is being built up on purpose. The ECB's June report put the euro's share of world FX reserves at 20.2% at end-2025, while gold, at 27% of total official reserves, now outranks the euro (15% on that basis). From Q4 2026, any eligible central bank can borrow up to EUR 50 billion of euro through the ECB's enhanced repo facility, EUREP. The digital euro law is in trilogue talks. The European Council wants them finished by end-2026, and the ECB aims to be ready for a first issuance in 2029.

Risks and open questions

Bull case: The euro's base as a reserve and funding currency is broad and, on the ECB's and IMF's data, growing slowly. Its share of allocated reserves rose to 20.60% in Q2 2026 from 20.04% in Q1, while the dollar's fell to 56.70%. Euro international debt issuance in 2025 was the highest since the euro began, and foreign-currency bond issuance in euro reached 31.1%. The ECB is acting on the plumbing: EUREP now gives eligible central banks standing access to up to EUR 50 billion each, and more than thirty have expressed interest. The ECB has tightened early (deposit rate 2.50%) and says inflation should return to around target towards end-2027 (forecast), which keeps real rates from falling too far. Bulgaria's entry shows the euro area can still grow. The digital euro, if the law passes in 2026, gives the euro a public digital form; Lagarde calls payment infrastructure part of Europe's sovereignty. Inference (AA): if energy prices ease and the Fed stops hiking first, the euro's terms-of-trade drag fades and the rate gap narrows in its favour.

Bear case: The euro is exposed on three fronts. First, energy: as an importer, the euro area pays more for oil and gas as prices rise, and the euro fell from 1.1699 on 21 August to 1.1177 on 7 October while energy inflation reached 18.9%. Second, fiscal: euro area debt rose to 88.8% of GDP by Q2 2026, France ran a 5.1% deficit, and ten EU countries, including France and Italy, are under an excessive deficit procedure. That makes TPI use legally and politically harder exactly where spreads are widest, since fiscal-rule compliance is its first criterion. Third, the euro's global role is contested: gold now makes up 27% of total official reserves, above the euro, and the ECB notes rising gold holdings and alternative payment systems as signs of fragility. The euro's share of FX turnover fell to about 29% in 2025 and of CLS-settled trades from 36.3% to 32.2%. The digital euro is not law yet and a first issuance is not before 2029. Inference (AA): hiking into weak growth (0.9% in 2026, ECB staff forecast) raises the cost of servicing that debt.

Falsifiers: - Energy-importer reading fails if EUR/USD rises decisively while euro area energy inflation stays above 15% in the October flash (due 2026-11-04). - Energy-importer reading fails if oil prices fall and the euro still weakens, which would point to fiscal or capital-flow drivers instead. - Fiscal-drag case fails if French and Italian spreads narrow without TPI activation while the ECB keeps hiking. - Fiscal-drag case fails if the next Eurostat debt release shows the EA21 ratio falling from 88.8% of GDP. - Rising-global-role case fails if the Q3 2026 COFER release shows the euro's reserve share falling back below 20%. - Rising-global-role case fails if EUREP draws no use from foreign central banks once drawings open in Q4 2026. - Digital-euro timeline fails if trilogues do not conclude by end-2026, as the European Council asked.

Value accrual gate: Not a crypto asset. A stronger euro lowers the euro area's energy import bill and helps importers and euro-based holders of dollar debt; it cuts the euro value of exporters' foreign earnings. A larger international role lowers euro borrowing costs for issuers but does not by itself benefit any specific holder.

What to watch

FOMC decision: the dollar side of the rate gap. (2026-10-27 to 2026-10-28); Source: federalreserve.gov

ECB monetary policy meeting: third hike or pause; any TPI or exchange-rate language. (2026-10-29); Source: ecb.europa.eu

Eurostat flash estimate of October euro area inflation. (2026-11-04); Source: ec.europa.eu

Eurostat full October HICP release. (2026-11-18); Source: ec.europa.eu

ECB December meeting, with new staff projections and exchange-rate assumptions. (2026-12-17); Source: ecb.europa.eu

End of the digital euro trilogues the European Council asked for. (by 2026-12-31); Source: ecb.europa.eu

First EUREP drawings by foreign central banks. (2026-Q4); Source: ecb.europa.eu

IMF COFER Q3 2026: does the euro hold above 20% of reserves? (around 2026-12 to 2027-01 (date not confirmed)); speculative, no scheduled source

Any TPI activation if French or Italian spreads become disorderly. (no scheduled date); speculative, no scheduled source

Eurostat April 2027 EDP notification of 2026 deficits and debt. (2027-04-21); Source: ec.europa.eu

AA inference

Inference (AA): the euro is the graph's link between the energy shock, ECB policy and Europe's sovereign debt. In 2026 it has traded like an energy importer's currency: it weakened from August to October as oil rose, even while the ECB hiked. Its role abroad depends on things the ECB does not set alone: a larger pool of safe euro assets, fiscal credibility in France and Italy, and a digital euro law. AA watches four signals: the ECB and Fed decisions on 28-29 October, the October HICP flash on 4 November, French and Italian spreads against TPI language, and the next COFER share. The view weakens if the euro rises while energy inflation stays high, which would show rate expectations outweigh the energy bill. It also weakens if spreads widen sharply and the euro holds steady, which would show fiscal stress staying national.

Sources

ECB euro reference rates for 22 October 2026 (units per euro): USD 1.1205, JPY 175.97, GBP 0.83770, CHF 0.9211, CNY 7.4786; rates are usually updated at around 16:00 CET on working days and are published for information purposes only. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB EUR/USD reference rates: 1.1383 on 1 July, 1.1699 on 21 August, 1.1616 on 10 September, 1.1298 on 1 October, 1.1177 on 7 October, 1.1253 on 16 October and 1.1205 on 22 October 2026. (Source: ecb.europa.eu, accessed 2026-10-22)

Federal Reserve G.5A: the euro averaged 1.1306 US dollars in 2025, 1.0820 in 2024 and 1.0817 in 2023. (Source: federalreserve.gov, accessed 2026-10-22)

Key ECB interest rates: deposit facility 2.50%, main refinancing 2.65%, marginal lending 2.90% from 16 September 2026; 2.25% deposit rate from 17 June 2026; 2.00% from 11 June 2025. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB, 10 September 2026: the three key rates were raised by 25 bp; 'The conflict in the Middle East continues to generate inflation pressures'; staff project headline inflation of 3.0% (2026), 2.5% (2027) and 2.1% (2028) (forecast); the TPI 'is available to counter unwarranted, disorderly market dynamics'. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB press conference Q&A, 10 September 2026: Lagarde declined to comment on widening spreads, called debt cancellation 'a pure violation of the Treaty', and said she hoped the digital euro legislation in trilogue would be voted on 'certainly before year end', adding that 'payment infrastructure is part of our sovereignty'. (Source: ecb.europa.eu, accessed 2026-10-22)

Federal Reserve, 16 September 2026: target range raised to 3-3/4 to 4 percent, by a 12-0 vote. (Source: federalreserve.gov, accessed 2026-10-22)

ECB: the euro short-term rate (€STR) was 2.440% for 21 October 2026, on volume of EUR 63,639 million. (Source: ecb.europa.eu, accessed 2026-10-22)

Eurostat, 16 October 2026: euro area HICP inflation 3.8% in September (3.2% in August); energy 18.9%, services 3.2%, food, alcohol and tobacco 1.3%, excluding energy, food, alcohol and tobacco 2.5%; Bulgaria 5.6%; the euro area aggregate is EA21 from January 2026; the October flash is due on 4 November 2026. (Source: ec.europa.eu, accessed 2026-10-22)

Eurostat flash estimate, 2 October 2026: euro area inflation estimated at 3.8% in September, energy 18.8%. (Source: ec.europa.eu, accessed 2026-10-22)

Eurostat, 21 October 2026: euro area (EA20) government deficit 3.0% of GDP in 2024 and 2025; debt 86.6% to 87.7%; EA21 2025 debt 87.3%; eleven member states had deficits of 3% or more, the largest Romania 7.8%, Poland 7.2%, Belgium 5.2%, France 5.1%; highest debt Greece 145.4%, Italy 136.7%, France 115.7%; Bulgaria deficit 4.0% and debt 29.9%, with a Eurostat reservation; next notification 21 April 2027. (Source: ec.europa.eu, accessed 2026-10-22)

Eurostat, 21 October 2026: euro area (EA21) government debt 88.8% of GDP in Q2 2026, from 88.4% in Q1 2026 and 87.3% in Q2 2025. (Source: ec.europa.eu, accessed 2026-10-22)

Council of the EU (page reviewed 10 July 2026): Austria, Belgium, Bulgaria, Finland, France, Hungary, Italy, Poland, Slovakia and Romania are under a deficit-based excessive deficit procedure; procedures opened for Finland (20 January 2026) and Bulgaria (10 July 2026); Malta's was closed on 12 June 2026. (Source: consilium.europa.eu, accessed 2026-10-22)

ECB, 21 July 2022: the TPI allows secondary-market purchases, focused on public-sector securities of one to ten years, with no ex ante size limit; eligibility criteria start with compliance with the EU fiscal framework (not being under an excessive deficit procedure or having failed to act on a Council recommendation), plus no severe macroeconomic imbalances, fiscal sustainability and sound policies. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB, International role of the euro (June 2026): euro share of global FX reserves 20.2% at constant Q4 2025 exchange rates at end-2025 (20.7% a year earlier); gold reached 27% of total official reserves, above the euro (15%) and US Treasuries (22%); euro share of international debt securities 24.6%, loans 21.7%, deposits 17.3%; about 29% of FX transactions (BIS, April 2025); CLS-settled FX share down from 36.3% to 32.2%; euro share of foreign-currency bond issuance 31.1% in 2025; 60.0% of euro area exports invoiced in euro; German bond convenience yield about 90 bp in 2025 versus about 190 bp for US Treasuries. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB, 2 June 2026: the euro's international role 'increased moderately in 2025' to around 20% across indicators; euro international debt issuance was the highest since the euro's introduction; Lagarde: 'There is an opening for the euro to enhance its global appeal'; the release flags rising gold holdings and alternative cross-border payment systems as signs of fragility. (Source: ecb.europa.eu, accessed 2026-10-22)

IMF COFER, 30 September 2026: euro 20.60% of allocated FX reserves in Q2 2026 (20.04% in Q1); US dollar 56.70% (57.18%); yen 4.96%; renminbi 2.11%; total FX reserves $13.22 trillion. (Source: data.imf.org, accessed 2026-10-22)

ECB, 14 February 2026: EUREP enhanced with standing access in principle for all central banks, excluding those barred for money laundering, terrorist financing or sanctions; changes apply from Q3 2026. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB Executive Board member Lane, 21 October 2026 (Shanghai): the maximum EUREP line per central bank is EUR 50 billion, priced at the MRO rate plus a spread, one day to one week; more than thirty central banks expressed interest; first foreign central banks onboarded at the start of October; drawings possible from Q4 2026. (Source: ecb.europa.eu, accessed 2026-10-22)

Lagarde at the IMFC, 17 October 2026: 'the energy shock is too large to “look through” but a measured response remains appropriate'; inflation expected to return to around target towards the end of 2027; EUREP 'reinforces the international role of the euro'. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB, 1 January 2026: Bulgaria introduced the euro, making 21 euro area member states and about 358 million users; conversion rate 1.95583 lev per euro; the Bulgarian National Bank governor joins the Governing Council and the rotating voting system takes effect. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB, 8 July 2025: the EU Council approved Bulgaria's euro area accession from 1 January 2026 at 1.95583 lev per euro, the lev's ERM II central rate since 10 July 2020. (Source: ecb.europa.eu, accessed 2026-10-22)

Council of the EU, 19 December 2025: position on the digital euro (online and offline use, holding limits set by the ECB within a Council-agreed ceiling) and on strengthening the legal tender role of cash. (Source: consilium.europa.eu, accessed 2026-10-22)

ECB Executive Board member Cipollone, 6 October 2026: Parliament adopted its position in July 2026 and trilogues are under way; the European Council called for negotiations to conclude by end-2026; the ECB aims to be ready for a potential first issuance in 2029; a 12-month pilot is planned from the second half of 2027; holding limits of EUR 500-3,000 studied were illustrative only. (Source: ecb.europa.eu, accessed 2026-10-22)

Account of the ECB's 9-10 September 2026 meeting (published 8 October): the euro had appreciated by 1.9% against the US dollar and 0.7% in nominal effective terms since the July meeting; markets priced 84 bp of hikes by end-2027 (64 bp in July); sovereign spreads over OIS broadly stable. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB staff projections, September 2026: the euro depreciated about 1.0% against the dollar and 0.3% in effective terms since the June projections; oil assumed at USD 88 a barrel in Q3 2026 (assumption); real GDP growth projected at 0.9% (2026), 1.4% (2027) and 1.5% (2028) (forecast). (Source: ecb.europa.eu, accessed 2026-10-22)

Eurosystem weekly financial statement as at 9 October 2026: banknotes in circulation EUR 1,633,429 million; gold and gold receivables EUR 1,286,239 million; total assets EUR 5,943,911 million. (Source: ecb.europa.eu, accessed 2026-10-22)

ECB calendar: monetary policy meetings on 28-29 October 2026, 16-17 December 2026 and 3-4 February 2027, with press conferences on the second day. (Source: ecb.europa.eu, accessed 2026-10-22)

Federal Reserve: remaining 2026 FOMC meetings on 27-28 October and 8-9 December. (Source: federalreserve.gov, accessed 2026-10-22)