Recent monetary policy divergence has weighed on EUR/USD, with the pair trading near 1.138 as of late September 2026 after declining from April highs above 1.18. The Federal Reserve raised its target range to 3.75-4.00% in September—its first hike since 2023—while markets price a high probability of further tightening by year-end amid resilient U.S. data and elevated Treasury yields. The ECB lifted its deposit rate to 2.50% in September to address persistent inflation near 3.3%, driven partly by Middle East energy pressures, yet the policy gap favors the dollar. Key upcoming catalysts include the October FOMC and ECB meetings, with incoming inflation and growth releases likely to shape rate expectations and the pair's path through year-end.