Money has been doing some weird stuff lately. If you’re checking the USD to Euro exchange rate today, January 17, 2026, you’ll see it sitting right around 0.86. To put that in plain English, your one US dollar gets you about 86 Euro cents.
It’s been a bit of a climb. Just two weeks ago, on New Year’s Day, we were looking at 0.85. Honestly, a one-cent move might not sound like much when you’re just buying a croissant in Paris, but for businesses moving millions, that shift is huge. It’s basically the difference between a profitable quarter and a total headache.
So, why the sudden strength in the dollar?
What’s Actually Driving the USD to Euro Exchange Rate?
The big story right now is what’s happening in Washington versus Frankfurt. We’ve entered this strange "splintering" phase where central banks aren't moving in lockstep anymore. For the last couple of years, everyone was just raising rates to fight inflation. Now? It's a mess.
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The Federal Reserve—currently led by Jerome Powell until his term ends in May—is keeping things steady. Rates are sitting between 3.5% and 3.75%. The Fed feels like they’ve hit a "neutral" zone. Basically, they aren't in a rush to cut rates because the US labor market is still holding up surprisingly well. When US rates stay high, investors keep their money in dollars to chase those better returns.
Meanwhile, over in Europe, the European Central Bank (ECB) is playing a much more cautious game. Christine Lagarde and her team are watching inflation hit that 2% target, but the growth just isn't there. Germany is still struggling to shake off a long period of stagnation. Because the Eurozone economy feels "softer" than the US, the Euro is having a hard time gaining ground.
The Trump Factor and Trade Tariffs
We can't talk about the USD to Euro exchange rate in 2026 without mentioning the political climate. We are in the second year of the second Trump administration, and the "America First" trade policies are hitting the currency markets hard.
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- Tariffs: New tariffs on European goods make those products more expensive for Americans.
- Growth Gap: The US is projected to grow at about 2% this year, while the Eurozone is lucky to hit 1.2%.
- AI Investment: This is a big one. The US is pouring roughly $2 trillion into AI infrastructure. Europe? They’re closer to $300 billion. Capital follows the tech, and right now, the tech is in Silicon Valley, not Berlin.
Is the Euro Undervalued Right Now?
Some experts, like the folks at ABN AMRO, actually think the dollar is too strong. They’ve been calling for a "dollar sell-off" for months, arguing that the US fiscal deficit is becoming a liability. There’s a theory that if the Fed starts cutting rates faster than expected once a new Chair takes over in May, the Euro could rally back toward 0.90 or even 0.95.
But honestly? That feels like a stretch today.
The market is currently betting on stability. Bloomberg Economics is forecasting that the ECB will keep its deposit rate at 2% for the rest of the year. If they don't move, and the Fed stays put, we’re likely stuck in this range-bound dance for a while.
What Most Travelers Get Wrong
If you're looking at Google and seeing 0.86, don't expect to actually get that rate at an airport kiosk. Those "interbank" rates are for banks. By the time you get to a physical exchange desk, you're likely paying 0.81 or 0.82 after fees and markups.
Pro tip: Use a digital bank or a credit card with no foreign transaction fees. You’ll get a rate much closer to the actual market value than any "Change" booth will ever give you.
Looking Ahead: What to Watch
The next few months are going to be volatile for the USD to Euro exchange rate. Keep your eyes on three specific things:
- The Fed Chair Succession: Jerome Powell leaves in May. If the new pick is someone who wants aggressive rate cuts, the dollar will tank.
- German Industrial Data: If Germany's manufacturing sector finally wakes up, the Euro will get a massive boost.
- Oil Prices: The recent arrest of Nicolás Maduro has caused some ripples in energy markets. Since Europe imports more of its energy than the US, high oil prices usually hurt the Euro more than the Dollar.
Actionable Steps for Navigating This Rate
If you are a business owner or a frequent traveler, sitting and waiting for the "perfect" rate is usually a losing game. Currency markets are too fast for that.
- For Travelers: If you have a trip coming up this summer, consider "layering" your currency purchases. Buy half now at 0.86 and half in a month. It averages out your risk.
- For Small Businesses: If you’re paying European suppliers, look into "forward contracts." This lets you lock in today's 0.86 rate for a payment you have to make in six months. It protects your margins from a sudden Euro rally.
- For Investors: Keep an eye on the "rate differential." As long as US interest rates are significantly higher than European rates, the dollar will likely remain the "cleanest shirt in the dirty laundry basket."
The current trend suggests the dollar has some staying power, but in the world of FX, everything can change with a single tweet or a surprise inflation report. Stay flexible.
Next Step: Check your credit card's "Foreign Transaction Fee" policy today. If it's anything above 0%, you are effectively losing 3 cents on every dollar you spend in Europe, regardless of what the official exchange rate says. Look into travel-specific cards or fintech apps to keep more of your money during the conversion.