The primary driver of EUR/USD sentiment remains the widening policy-rate gap, with the Federal Reserve lifting its target range to 3.75–4.00% in September 2026—its first hike since 2023—while the ECB deposit rate stands at 2.50% after two 2026 increases. Persistent euro-area inflation at 3.3% in August, driven by energy costs, supports further ECB tightening expectations, yet the roughly 125–150 basis point differential continues to favor the dollar amid resilient U.S. data and hawkish FOMC projections. Traders are focused on the October 28–29 central-bank meetings for signals on additional hikes, alongside upcoming inflation releases and any shifts in Middle East energy dynamics that could alter rate-path pricing and the pair’s near-term trajectory through year-end.