Euro/US Dollar FX Spot Rate

A Citi analysis says concerns about France's fiscal position could add pressure on the euro to weaken, while the European Central Bank may have to halt rate increases after December or sooner if financial market tensions spread across the eurozone. Citi believes the ECB is shifting to give more weight to financial conditions than to inflation concerns, raising the question of how long the ECB can continue its tight monetary policy. The market has already priced in almost all expectations for an ECB rate hike in December and still expects nearly two more hikes in 2027. Citi expects the market may lower its ECB rate expectations relative to Federal Reserve rates by 0.50 to 0.75 percentage points, as investors assess the rate outlook for both central banks. Overall, Citi sees France's fiscal uncertainty and the possibility that the ECB shifts toward a more accommodative monetary policy as factors that could push the euro down further.

The dollar has surged to an 18-month high in foreign exchange markets, buoyed by uncertainty over Europe's economy across the Atlantic and by some investors betting on further gains for the greenback. The dollar has risen about 5% against the euro so far this year, and concerns that France's massive fiscal deficit and its spillover effects could spread to Italy and the wider euro area are likely to be the main driver of the dollar in the coming months. The yield gap between French and German 10-year government bonds recorded its widest weekly expansion in decades last week, and the yield spread between Italian and German government bonds also reached its widest since the COVID-19 pandemic. The euro fell 0.67% against the dollar from the previous week. The European Central Bank raised its policy rate by 25 basis points in September, but the euro fell after the governing council's decision as markets worried about the negative economic impact of higher rates, and one concern is that hawkish signals have not provided much support for the euro.

Pierre Wunsch, Belgian Central Bank Governor and member of the European Central Bank's Governing Council, said on the 8th that arguments by some ECB officials that the interest-free minimum reserve requirement imposed on private banks should be raised lack a clear basis and are unconvincing. In a speech in Brussels, Wunsch noted that if the increase currently being discussed among policymakers were implemented, the minimum reserve system could become a tool close to fiscal policy. He further expressed the view that it could even undermine the credibility of future asset purchase programs.

UOB strategists Quek Ser Leang and Lee Sue Ann flag renewed selling in EUR/USD, which dropped to 1.1164 before closing at 1.1195. While downside momentum has cooled, the Euro (EUR) remains vulnerable as long as resistance near 1.1265 holds. The pair faces downside risks toward 1.1140 against the US Dollar.

Banque de France Governor Moulin said on Wednesday that the strain in French bonds is serious but does not meet the conditions for help from the European Central Bank. French 10-year yields went back up after Tuesday's relief, and the Euro gave back its bounce as French bonds sold off again.

Rabobank expects the EUR/CHF pair to remain close to the 0.93 area in the coming weeks, according to its latest outlook. The bank attributes the firm Swiss Franc to continued safe-haven demand driven by Eurozone fiscal tensions. The forecast keeps the cross near current levels rather than projecting a sharp move in either direction.

The Euro came under pressure against its peers again on Wednesday after a relief recovery the previous day, with the major currency down 0.63% at around 1.1188 against the US Dollar in European trade. The renewed slide came as a sell-off in French bonds intensified, following a single day of relief for the currency.

Emmanuel Moulin, governor of the Bank of France, said the French economy is in a worrying situation but has not yet reached the point of needing help from the European Central Bank, or ECB. In an interview with France Inter radio on October 7, he said that under current circumstances he sees no need for the ECB to intervene, and that France's solution does not lie with the ECB but in fixing its own domestic problems by passing a budget aimed at reducing the deficit. French financial markets are currently under pressure from rising government borrowing costs amid a global bond selloff, while the euro has weakened on investor concerns over France's fragile fiscal position, which could affect other European economies. Meanwhile, the French government submitted its 2027 budget draft to parliament on October 1, with Prime Minister Sébastien Lecornu's government aiming to cut the budget deficit from 5.4% of GDP this year to 5% in 2027. However, the government is under pressure from both the far-right and far-left opposition, leaving the push to control the deficit through the budget uncertain.

Angel Ubide, head of fixed-income and macroeconomic research at US hedge fund giant Citadel, said in an interview with Reuters that France no longer has any room for error in repairing its public finances. He said that ahead of the 2027 presidential election, pressure from financial markets will push the government to pursue spending restraint, and that it is important not only to hold the presidential election but also to form a parliamentary majority capable of restoring fiscal health. Amid a global bond selloff, France's borrowing costs have surged, and concerns that the country's fragile finances could spill over to other European nations have driven selling of the euro. Ubide noted that for now France does not pose a systemic risk to Europe, saying that discussing a systemic problem in France means discussing a systemic problem in Europe. The yield on France's 10-year government bond briefly topped 5% last week, hitting a 24-year high, while the euro fell below 1.12 dollars on the 5th, touching a 17-month low.

Markets are putting a new price on French risk after decades of budget deficits and steadily rising debt, with investors charging much more to hold government bonds, the stock market under pressure and the cost of insuring bank bonds against default jumping. The euro fell to its weakest level since May 2025 on Monday, reflecting fears that the upheaval will spill beyond France's border. Deutsche Bank Vice Chair for Global Macro Ozan Tarman said the French storm got messier last week as it began spreading into European credit toward Germany and beyond, and that he does not think it is over yet, warning there may be more days like last Thursday and Friday. He said the ECB will not let the situation become too systemic, though he expects markets to treat any intervention as a selling opportunity for the euro, with most people seeing it going to 109 before 115. On US equities, Tarman said he would not be surprised if Deutsche Bank's Binky Chadha upgrades his 8,000 year-end S&P 500 forecast soon, citing bottom-up expectations of roughly 27% earnings growth in the next season, and said that gun to his head he sees 8,200 before 7,400. He added that he favors emerging markets, particularly long Latin America versus short Asia, with long Brazil and short India a consensus trade he expects to keep delivering.

A surprise upside in Czech inflation to 2.5% has reinforced the Czech National Bank's hawkish stance, according to Societe Generale's Kenneth Broux. With policymakers signalling a possible hold or hike, attention now turns to core and services inflation data that could justify a November rate increase. The development keeps the Czech Koruna supported against the Euro.

Student protests in France have intensified and spread across the country after beginning in Paris in late September, then spilling over into many cities, with school closures, street demonstrations, arson attacks and clashes with police. CNBC reported on October 6, 2026, that the Justice Ministry said 5,060 people had been arrested, and 87% of them were minors. Education Minister Edouard Geffray disclosed that 190 students were injured, with reports that a 15-year-old boy lost his hand in clashes with riot police in the northern city of Lens. The protests began with student discontent over teacher shortages, long class hours and dilapidated school buildings, forcing hundreds of schools nationwide to shut down. The crisis comes as the government of Prime Minister Sébastien Lecornu has almost no fiscal room to increase education spending, as it prepares to negotiate the 2027 budget amid political divisions and economic pressure. French Finance Minister Roland Lescure said the government aims to adjust its overall fiscal position by 54 billion euros, or about 60.7 billion dollars, part of which will come from freezing the pay of public-sector employees, including teachers. The budget problems are also adding pressure to the French government bond market, with the yield on 10-year French government bonds up 129 basis points since the start of the year, while the euro has fallen to a 17-month low against the US dollar. The situation is all the more significant ahead of France's 2027 presidential election, with far-right candidate Marine Le Pen, currently the front-runner in polls, warning that if the public does not choose major political change, France may be heading toward a de facto default. She has proposed a multi-pronged fiscal recovery plan, from scrapping more than 120 taxes deemed unnecessary, adjusting some parts of the pension system, capping France's net contribution to the European Union budget at 5 billion euros, and tackling aggressive tax planning by multinational companies. She says these measures would bring France's budget deficit below the 3% of GDP threshold within 18 months and generate total budget savings of about 140 billion euros by 2032. France is currently under the European Union's Excessive Deficit Procedure, having run a deficit as high as 5.1% of GDP last year, while public debt rose to 119% of GDP at the end of June. However, Ian Bremmer, president and founder of Eurasia Group, believes that while Le Pen wants major budget cuts, she at the same time does not want to raise taxes or touch major welfare spending, which accounts for more than 50% of French expenditure, leaving that goal facing severe constraints. Ken Egan, director of sovereign ratings at KBRA, said the widening spread on French bonds reflects both concerns about the fiscal direction and a risk premium from political uncertainty.

French long-end yields could come under renewed pressure before the country's budget is passed, according to market strategist Mark Cudmore, who said the worst of the French stress has yet to be seen. Speaking on Bloomberg's "The Opening Trade," Cudmore noted that French 30-year yields are about 20 basis points lower than they were only on Friday morning, just three sessions ago, describing the move as a temporary pause in an otherwise downward direction. He said a lot depends on what Marine Le Pen says later today, but added that the situation is likely to get worse before it gets better given domestic unrest and the lack of appetite among any parties to take the hard medicine needed. Cudmore also cautioned that shorting French bonds carries very negative carry, meaning investors must pick their moments even if the longer-term outlook deteriorates over the next year. On the euro, he said the currency has seen a slight recovery from yesterday morning's lows in Asia, but that the last few weeks have shown a downtrend and he expects more euro downside on the crosses and against the dollar.

The Euro is underperforming major currencies, with EUR/USD briefly hitting 1.1161, its lowest since May 2025, according to Brown Brothers Harriman's Elias Haddad. Haddad flags France's budget crisis spilling into wider Eurozone bond markets, which complicates potential European Central Bank Transmission Protection Instrument activation. The Euro remains pressured by rising fiscal risk and expectations of a shallower ECB hiking cycle.

The euro fell to its lowest level against the dollar in 17 months and the Paris stock market shed one percent Monday on growing concerns about France's high debt levels after an underwhelming government budget plan unveiled last week. The CAC 40 was also pushed lower by a 10 percent drop in the share price of Schneider Electric after the French software group said it would buy US peer PTC for $22.6 billion in cash. Spanish Prime Minister Pedro Sanchez on Monday called a snap election for November 29, after parliament rejected housing relief measures proposed by his minority government, with Spain's stock market edging up about 0.5 percent around midday. The oil market began the week calmer after G7 countries, in coordination with the International Energy Agency, agreed Friday to immediately release 100 million barrels of diesel and crude oil to ease global energy supply concerns caused by the US-Iran war, and Saudi Aramco chief executive Amin Nasser described oil stockpiles as "scarily thin." Asian stock markets closed higher, with regional stocks catching up with global gains Friday after a big miss on US jobs creation gave the Federal Reserve breathing room to hold off an interest rate increase this month.

Lane, the European Central Bank's chief economist and an executive board member, said on the 5th that the sharp rise in energy costs toward the end of summer could weigh on economic growth, and expressed the view that if demand destruction occurs, the degree of monetary tightening could be limited. The ECB carried out two rate hikes this summer, and markets, concerned about second-round effects on prices from higher energy costs, expect another two to three rate hikes over the coming year. Lane noted that, judging by underlying inflation indicators, an upward overshoot in medium-term inflation has not become entrenched, and said economic growth is more resilient than expected, supported by government spending and artificial intelligence investment, while also stating that soaring energy costs could have an adverse impact. He said the second wave of this energy supply shock poses a direct upside risk to the inflation outlook while representing a downside risk to the growth outlook, and that the demand-destruction channel could limit the adjustment in the monetary policy stance needed to bring inflation back to target. He said that while government spending is underpinning the economy, the fiscal stimulus effect is expected to shrink over the coming years, adding further weight on growth, and that monetary policy remains on a middle path, making a cautious approach appropriate for containing inflation.

Eurozone Sentix Investor Confidence dropped to 2.7 in October from 5.1 in September, according to the monthly survey of roughly 1600 financial analysts and institutional investors published by Sentix GmbH. The reading, which tracks market opinion on the current economic situation and expectations for the next six months, came in below the prior month's level. The Euro showed little reaction to the data, with EUR/USD down 0.37% at around 1.1207 at press time, as the currency was driven instead by heightened French fiscal risks. A higher reading is typically seen as positive for the Eurozone and the Euro, while a lower number is viewed as negative for the single currency.

MUFG's Lee Hardman says the euro has weakened at the start of the week as intensifying fears over destabilizing financial conditions in the euro-zone, triggered by a sharp sell-off in French government bonds, drive a broad-based softening of the single currency. The euro fell to fresh year-to-date lows overnight against the US dollar and yen at 1.1161 and 176.41 respectively. The yield spread over German Bunds has blown out to just over 140bps, almost 60bps wider than before the summer, adding to a sense of crisis in the French government bond market. The unfavourable developments have triggered fears over the re-emergence of fragmentation risks in the euro-zone that could impede the transmission of monetary policy, and market participants are watching closely for further signs of contagion after Italian government bonds were also negatively impacted at the end of last week, even at the short-end of the curve. With no easy way out in the near term, MUFG says the euro can weaken further and recommended a short EUR/JPY trade idea in its latest FX Weekly report on top of its existing long USD/SEK trade idea.

The euro weakened 0.8% to 1.1161 dollars in Asian morning trading, its lowest level since May 2025, before paring losses to 0.6% as of 2:00 p.m. Thailand time. The main driver was selling by hedge funds after reports that Spanish government officials were preparing to call an early election, which added pressure on the French bond market, while the spread between French and German government bond yields hit its highest level since 2011 last Friday. A group of traders said short-term-focused funds in Asia sold euros and bought dollars in the spot market, pushing the currency to a level that triggered further selling from options transactions. Analyst Homin Lee, a senior macro strategist at Lombard Odier Singapore, said the bond and money markets are clearly signaling that investors are worried about France's increasingly fragile government stability, as well as the country's deteriorating fiscal discipline ahead of the 2027 election, with opposition parties unwilling to compromise with President Emmanuel Macron's government. Meanwhile, Marine Le Pen of the far right and Jean-Luc Melenchon of the far left are likely to advance to the final round of the election, according to polls published last week.

The Euro came under intense selling pressure against its major currency peers as increased French fiscal concerns and political instability drove a sharp widening in the yield gap between French and German government bonds. France's Finance Minister Roland Lescure has vowed to cut the budget deficit from a target of 5% of economic output next year to the European Union limit of 3% by 2029, but analysts at BBH said they doubt the proposal will clear parliament without significant concessions, given the minority government. Ten-year French bond yields rose 0.65% to near 4.89% at press time after posting a fresh multi-decade high near 5% on Friday, and have gained over 28% in the last two months, while 10-year German Bund yields fell 1.26% to near 3.41% and have risen over 10% over the same period. The weaker Euro could boost the competitiveness of exports but raises the cost of imported goods, complicating the European Central Bank's fight against energy-driven inflation, and investors will focus later in the day on a speech by ECB Chief Economist Philip Lane scheduled for 08:00 GMT. Heightened French risk concerns have also improved the safe-haven appeal of the Swiss Franc, with investors watching Swiss Unemployment Rate data for September due on Tuesday.

Commerzbank analyst Thu Lan Nguyen says growing concerns over the sustainability of France's public debt have begun to weigh on the euro, which had previously remained largely unaffected by turmoil in bond markets. From an FX perspective, she argues the problematic aspect is the European Central Bank's central role in the mechanism, warning that in a worst-case scenario the ECB could face a dilemma between its mandate to preserve price stability and its responsibility to safeguard financial stability. The common currency's slide suggests markets see a rising probability that the ECB may have to intervene after all, and growing doubts that tools designed for such a scenario would be sufficient to contain the problem, with markets increasingly concerned the ECB could be forced into a more persistently accommodative monetary policy stance to ease pressure on long-term bond yields. Nguyen notes that as long as investors have access to a euro-denominated safe asset, the French government's problems remain a problem for OATs rather than for the euro itself, and that early signs of contagion spilling over to Germany would constitute a clear warning signal for the euro.

The Euro weakened against the British Pound to around 0.8475 in early European trading on Monday, pressured by French fiscal concerns following a steep bond market rout that stoked contagion fears across the Eurozone. Analysts at Brown Brothers Harriman noted that France's minority government has presented a plan to cut the budget deficit to 5.0% of GDP next year, but doubt the proposal will clear parliament without significant concessions, and warned that a rollover of the 2026 budget could push the deficit from 5.4% of GDP in 2026 to roughly 6.0% in 2027, moving France further from its European Commission commitment to bring the shortfall below 3% by 2029. Brent Donnelly, president of foreign exchange trading at Spectra Markets, said any budget promises made by the French government now are not very credible with a change of power coming soon. On the monetary policy side, Bank of England policymaker Catherine Mann said a rate hike is needed to manage inflationary risks, and markets are currently discounting roughly 30 basis points of rate hikes by the UK central bank through the end of the year, alongside approximately 90 basis points of cumulative tightening through 2027. On the daily chart, EUR/GBP remains capped below its key moving averages, with initial resistance at the Bollinger lower band around 0.8500 and further barriers at the Bollinger midline near 0.8565 and the 100-day simple moving average at 0.8580.

The Euro dropped below the 1.1200 mark against the US Dollar on Monday, hitting its lowest level since May 2025 during the Asian session. Spot prices traded just above 1.1150, down around 0.85% for the day, pressured by concerns over France's deepening debt levels and political gridlock ahead of next year's election. French borrowing costs have climbed alongside global yields, with the benchmark 10-year government bond yield rising above 4.9% and close to its highest level in decades, while France's debt-to-GDP ratio is expected to climb to 122% next year from 119% this year. Far-right leader Marine Le Pen, who leads in the polls for the presidential race, has proposed tax cuts and vowed to bring down France's retirement age to as low as 60, adding to market worries. Meanwhile, the US Dollar rallied to a fresh high since April 2025 as persistent geopolitical uncertainties countered Friday's disappointing US Nonfarm Payrolls report, which further tempered October Federal Reserve rate hike bets.

Standard Chartered Global Research judges that the odds of an October European Central Bank rate hike are limited. The team notes that core inflation in the Euro area has only edged up slightly since January. It also warns that higher yields pose downside risks to both growth and inflation. On that basis, the authors expect the Governing Council to wait for new macroeconomic projections at its December policy meeting before acting.

The Euro reversed previous daily gains against the British Pound on Friday, diving to fresh two-and-a-half-month lows just above 0.8500 and set to show a more than 1% weekly decline. The move followed hot Eurozone inflation data, which weighed on the single currency. The Euro's slide against the Pound marks a sharp turnaround from its earlier gains this week. The pair is now trading at its weakest level in roughly two and a half months.

ING's Chris Turner argues that the French debt sell-off has broken the narrative of ever-higher short-term rates and raised doubts about further European Central Bank tightening. The French risk premium is weighing on the Euro, according to Turner. The sell-off has cast doubt on the prospect of additional ECB rate hikes.

Investors are rushing to sell French bonds, equities and the euro amid concerns that the country's public debt is climbing toward 120% of gross domestic product, nearly double that of Germany, according to a Bloomberg report. The yield on 10-year French government bonds has jumped by more than 1 percentage point since June and stands at about 4.9%, close to its highest level since 2002, while the spread over equally dated German bonds has more than doubled since May to 141 basis points. The French government unveiled a draft budget on Thursday, October 1, proposing deep spending cuts to bring the deficit back to its original target of 5% this year, but the plan must pass through a highly divided parliament. Andrzej Szczepaniak, senior Europe economist at Nomura International, expects the French bond yield spread could widen to 200 basis points by the end of 2027. French Finance Minister Roland Lescure insists the government can still manage the situation.

The dollar strengthened to a 17-month high against the euro, amid a selloff in U.S. and European government bonds that pushed U.S. Treasury yields to new highs, while rising oil prices added to inflation pressure. The euro weakened below 1.123 dollars per euro for the first time since May 2025, and was last down 0.87% at 1.1229 dollars, having fallen nearly 2.5% in September, its largest monthly decline since July 2025. The yield on 10-year U.S. Treasury bonds touched its highest level since 2002 before falling more than 5 basis points to 5.239%, while French government bond yields jumped to a 14-year high on concerns about France's weak fiscal position, and German government bonds also faced selling pressure. Brian Daingerfield, head of G10 foreign exchange strategy at NatWest Markets, said the higher yields stemmed from concerns about fiscal policy, weakness in the French bond market, and worries about energy prices and rising inflation, with the market still expecting central banks including the Federal Reserve to continue tightening monetary policy. The pound fell 0.6% to 1.3186 dollars after dropping 2.1% in the past month, and was steady against the euro at about 85.11 pence per euro, its weakest level since late June.

The dollar index posted its sixth consecutive quarterly gain against a basket of currencies at the end of September, the longest such streak since 2022. As of 10:59 p.m. Thailand time, the dollar index was up 0.63% at 102.08, while the dollar rose 0.85% to 1.123 against the euro and strengthened 0.14% to 157.61 yen. Ray Attrill, head of foreign exchange strategy at National Australia Bank, said the dollar is now responding more to what is happening with the 10-year US Treasury note than to expectations about when the Federal Reserve will next raise interest rates. The yield on the 10-year US Treasury note climbed to 5.327%, its highest level since April 2002, while the yield on the 30-year US Treasury note rose to 5.678%, its highest in 24 years. Meanwhile, the US Labor Department will release September nonfarm payrolls data on Friday, October 2. Analysts expect payrolls to have increased by 98,000 in September, down from 162,000 in August, and expect the unemployment rate to hold steady at 4.1% in September.

Societe Generale strategist Kit Juckes warns that a proposed US diesel export ban would likely push up European diesel prices and weigh on the Euro and other European currencies. Juckes points to rising bond yields and oil prices as additional headwinds for the single currency. He also questions whether consensus Eurozone growth forecasts will be revised lower if these pressures persist.

Inflation in the European Union's large economies remains under pressure from rising energy prices, with September inflation readings for Germany, France, Italy and Spain all coming in above analyst expectations. Spain's inflation rate surged to 5%, the highest level since 2023, stirring concerns reminiscent of the last inflation spike in the region after Russia's invasion of Ukraine in 2022. Energy factors are still likely to push eurozone inflation close to 4% late this year, while a Bloomberg survey expects eurozone inflation, due to be published this Friday, to come in at 3.7%. A higher-than-expected reading would further raise the risk that inflation could exceed forecasts and push borrowing costs higher. Markets have nonetheless scaled back expectations that the European Central Bank will raise interest rates for a third time at its October meeting, since the inflation impact remains largely confined to the energy sector. ECB President Christine Lagarde said a global bond market selloff will help ease price pressures, while German two-year government bond yields fell 8 basis points to 3.22% and 10-year yields fell 6 basis points to 3.57% on Wednesday. Markets put the odds of a 0.25% ECB rate hike at its October 29 meeting at about one in three, and expect total rate increases of roughly 0.90% by the autumn of next year.