EUR/USD is driven mainly by the gap between Fed and ECB interest rates, then by the broad US dollar, relative growth, risk appetite, inflation data and politics.
EUR/USD, the euro against the US dollar, is the most-traded currency pair in the world. It prices the two largest developed economies against each other, so its moves are felt across the rest of the currency market.
Its direction usually comes down to a few drivers that repeat. The six below are in rough order of how much they tend to explain.
1. The gap between Fed and ECB interest rates
Money tends to move towards the currency that pays the higher interest rate. So the most important driver of EUR/USD is usually the gap between US and euro area rates, known as the interest-rate differential.
Here is where the two central banks stood when this guide was published, as at 4 August 2026. The Federal Reserve held its target range at 3.50% to 3.75% on 29 July 2026. The vote was 9 to 3, and all three dissenters wanted a quarter-point rise. The European Central Bank raised its three key rates by 25 basis points in June, taking the deposit facility rate to 2.25% from 17 June 2026. It was the ECB's first rate rise since September 2023, and it held rates in July. That left US rates about 125 to 150 basis points above the ECB deposit rate.
A wide gap in favour of the US supports the dollar, because dollar deposits pay more. Markets also price where rates are expected to go. In mid-2026 the ECB had started to raise rates while the Fed stayed put, so the gap was expected to narrow. That expected change helped the euro more than the size of the gap itself.
For this reason the rate decisions, statements and press conferences of both banks are the main dates on a EUR/USD calendar. The vote split can move the pair as much as the decision. Three dissents in favour of a rise, as in July, tell the market that the next move may be up.
2. The US dollar and the DXY
Broad dollar moves feed straight into EUR/USD. The dollar is the main currency for world trade and central-bank reserves, so a change in its value shows up in every major pair.
The usual gauge is the US Dollar Index (DXY), published by ICE. It measures the dollar against six currencies. The euro is the largest, at 57.6% of the basket (source: ICE's fixed index weights). That is more than the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc put together.
Because the euro dominates the index, EUR/USD and the DXY usually move in opposite directions. When the index rises, EUR/USD usually falls.
This is why news that has nothing to do with Europe still moves the pair. A US jobs report, a change in Fed expectations or a rush into dollars during a sell-off can all push EUR/USD lower. Before you form a view on EUR/USD, check whether the dollar is rising or falling against the other major currencies. Our guide to the US Dollar Index explains how the index is built.
3. Relative growth: US and euro area data
Interest rates respond to how each economy is doing, so relative growth is a slower but steady driver of the pair.
When US data is consistently stronger, the dollar tends to benefit in two ways. Investors buy more US assets, and markets expect the Fed to keep rates higher for longer. When euro area data beats the US, the same logic supports the euro.
The releases most traders follow are:
- United States: non-farm payrolls and the unemployment rate, GDP, the ISM manufacturing and services surveys, and retail sales.
- Euro area: GDP, the purchasing managers' indices (PMIs), German data, since Germany is the largest economy in the bloc, and unemployment.
What moves the price is the surprise, meaning the difference between the actual figure and the forecast. A strong number that is still below forecast can weaken a currency. A weak number that is better than feared can lift it. Our NFP trading guide covers the US jobs report in detail.
4. Risk appetite and demand for the dollar in a crisis
Sometimes EUR/USD moves with risk appetite in other markets, whatever the rate picture says.
The dollar is the currency most investors buy when markets are under stress. During a geopolitical shock, a banking scare or a sharp fall in stocks, demand for dollars tends to rise and EUR/USD tends to fall. Traders call this "risk-off".
When markets calm down ("risk-on"), the flow can reverse. Money moves out of dollars into assets that depend more on growth, and EUR/USD can recover. The euro is generally seen as more sensitive to the economic cycle than the dollar.
The signs are usually in other markets: stock indices, volatility measures and government bond yields. On a day when stocks fall hard, demand for dollars can outweigh every other driver here for a session or two. That explains many days when the euro falls even though euro area news looks fine.
5. Inflation data: US CPI and euro area HICP
Inflation data shapes interest-rate expectations. That makes the US consumer price index (CPI) and the euro area's harmonised index (HICP) two of the releases that move EUR/USD most.
The figures for mid-2026 show how this works. As at the June 2026 release from the Bureau of Labor Statistics, US consumer prices were up 3.5% over 12 months and core prices (excluding food and energy) were up 2.6%. Prices fell 0.4% on the month, the largest monthly fall since April 2020, mainly because energy prices dropped. Both the headline and the core figure came in below forecasts.
Euro area inflation moved the other way. Eurostat's flash estimate for July 2026 (source: Eurostat, 31 July 2026) put annual inflation at 2.9%, up from 2.8% in June, with core inflation at 2.5% and energy prices up 10.0% on a year earlier.
The market reaction follows the logic of driver 1. US inflation below forecast makes a Fed rise less likely and brings cuts closer, which tends to weaken the dollar. Euro area inflation above forecast keeps further ECB rises possible, which tends to support the euro. Slowing US prices and rising euro area prices were a large part of why the euro held up in mid-2026.
As with growth data, the surprise is what counts. A CPI or HICP figure far from the forecast, as the US June figure was, often produces one of the largest intraday moves of the month.
6. Politics and public finances
Political events can move EUR/USD on their own, because currencies reflect confidence in a country's stability and its public finances.
In the US, the drivers include budget and debt-ceiling disputes, trade and tariff policy, and elections. In Europe, the pair reacts to anything that affects confidence in the euro area as a whole: elections in large member states, difficulty forming a government, worries about a member state's debt, and EU-level budget decisions.
Energy is the link between geopolitics and the euro. The euro area imports most of its energy, so a conflict that threatens supply pushes up European inflation, and that feeds into ECB policy. This is the chain behind the ECB's rise in June 2026, which followed the 2026 rise in energy prices.
Many political events are unscheduled, so they often cause price gaps and sudden jumps in volatility. Nobody can predict every headline. Traders can reduce position size before known dates such as elections, budget deadlines and summits.
The six drivers at a glance
# | Driver | Usual effect on EUR/USD |
|---|---|---|
1 | Fed and ECB rate gap | A wider gap in favour of the US tends to push EUR/USD lower. A narrowing gap tends to support it. |
2 | The US dollar and the DXY | A rising DXY usually means a falling EUR/USD, and the reverse. |
3 | Relative growth | Stronger US data tends to favour the dollar. Stronger euro area data supports the euro. |
4 | Risk appetite | Stress in markets tends to lift the dollar and weigh on EUR/USD. Calm can support it. |
5 | Inflation data | US inflation below forecast can weaken the dollar. Euro area inflation above forecast can support the euro. The size of the surprise matters most. |
6 | Politics and public finances | Instability or debt worries in either region can weaken that currency, often suddenly. |
How EUR/USD is traded as a CFD on MT5
Retail traders usually trade EUR/USD as a CFD (contract for difference). A CFD lets you take a position on the price without owning either currency. You buy if you expect the euro to rise against the dollar, and sell if you expect it to fall.
At NAMH Global, EUR/USD is available as a CFD on MetaTrader 5, on desktop, in a web browser or on mobile. MT5 has the charts, indicators and economic calendar you need to follow the drivers above. Our glossary explains the terms used here, our guide to forex leverage covers margin, and the forex page describes the wider market.
A CFD is leveraged, and the arithmetic shows what that means. One standard lot of EUR/USD is 100,000 euros. At an example price of 1.1000, that is a position worth $110,000, and each pip (0.0001) is worth $10. With leverage of 1:500, the maximum on our ECN account, the margin for that position is $220. A move of 22 pips against you, which EUR/USD can make in a single session, loses $220, the whole of that margin. Profit and loss are worked out on the full $110,000 position, so each further pip costs another $10. On the ECN account you also pay $5 per standard lot, round turn.
Size each position so that the loss at your stop is a small part of your account. You can practise first on a demo account, or compare the account types.
CFDs use leverage. You can lose money quickly, and you can lose all of the money you deposit. Only trade with money you can afford to lose.
EUR/USD questions
What is the biggest single driver of EUR/USD?
The gap between US and euro area interest rates is usually the biggest driver. When markets expect US rates to stay well above euro area rates, the dollar tends to attract money and EUR/USD tends to fall. When the gap is expected to narrow, the euro tends to gain.
How does the US Dollar Index (DXY) relate to EUR/USD?
The euro makes up 57.6% of the DXY basket, so the two usually move in opposite directions. When the index rises, EUR/USD usually falls. The source for the weights is ICE, which publishes the index.
Do EUR/USD and the DXY always move in opposite directions?
No, though they do most of the time. The index also contains the yen, the pound, the Canadian dollar, the Swedish krona and the Swiss franc, so a large move in one of those can put the index and EUR/USD out of step for a while.
Why does inflation data move EUR/USD so much?
Because it changes what markets expect the Fed and the ECB to do with rates. A US figure below forecast tends to weaken the dollar; a euro area figure above forecast tends to support the euro. The size of the surprise matters more than the level.
Is EUR/USD a good pair to learn on?
It is the most-traded currency pair and the most widely covered, which makes it easier to find data and commentary on it. That does not make it low risk. A EUR/USD CFD is leveraged and can move quickly around data releases and central-bank decisions.
Can I trade EUR/USD with NAMH Global?
Yes, as a CFD on MetaTrader 5, on desktop, in a web browser or on mobile. You can try it on a demo account first. CFDs use leverage. You can lose money quickly, and you can lose all of the money you deposit.
NAMH Global Ltd is a company registered in Saint Lucia (No. 2024-00372). It is not licensed by a securities regulator. This article is general information, not investment advice or a recommendation.