Euro/US Dollar FX Spot Rate

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.

European Central Bank President Lagarde has pushed back against expectations for another back-to-back ECB rate hike, according to MUFG's Lee Hardman. Lagarde stressed higher long-term yields and the need for a measured response, comments that weighed on the euro. The pushback tempers market expectations for consecutive ECB rate increases.

ING's Francesco Pesole reports that EUR/USD has broken below its summer lows and is trading near 1.1350 as Dollar strength dominates. He sees limited scope for another large break unless the Federal Reserve hikes in October and stays hawkish. In that scenario, EUR/USD could extend losses toward 1.10.

The U.S. Dollar Index is trading at 101.37, holding above support at 101.33, as dovish remarks from New York Fed President Williams cut the odds of a 25 basis point rate hike in October from 71% to 48%. Williams said he saw no urgency after the September Fed rate hike and signaled a more gradual approach to future increases. Attention now turns to the September core PCE price index report due today and a two-day run of U.S. labor market data culminating in Friday's Nonfarm payrolls report. Elevated U.S. inflation and frequent issuance of U.S. Treasuries have pushed the 10-year U.S. Treasury note yield above 3.6%, supporting the greenback, while the euro heads for its worst monthly performance against the dollar in over a year as energy costs tied to the conflict in Iran and rising geopolitical tensions push French bond yields 115 basis points above their German counterparts. Sterling is trading at 1.3238, capped below 1.3250, with support at 1.3205, as Bank of England data showed unsecured consumer lending picked up in August, complicating the Bank's inflation fight. On the technical side, a break above 101.61 would shift the Dollar Index's focus to 101.83 and 102.03, while a close below 101.08 would turn the trend down; the euro faces resistance at 1.1353 and support at 1.1311, and the pound faces resistance at 1.3250 with support at 1.3205.

The euro is trading near its lowest levels of the year against the dollar, with its path ahead seen as heavily dependent on a global energy shock and rising political risk in Europe. After pushing toward 1.20 dollars in August, the euro has fallen about 2 percent this month, dipping just below 1.14 dollars to a two-month low, and was recently changing hands around 1.137 dollars. In Germany, far-right gains in state elections have dealt a blow to Chancellor Merz, while French markets are under pressure from concerns over high debt and political gridlock, compounded by the approach of the 2027 presidential election. The yield spread that French 10-year government bonds demand over German bunds has widened sharply to more than 110 basis points, and Bank of America estimates that the euro falls 0.4 percent against the dollar for every additional 10 basis points of spread widening. The war in Iran has disrupted liquefied natural gas shipments through the Strait of Hormuz, pushing European gas prices above 80 euros per megawatt-hour this month to their highest since late 2022. Kasper Hense of RBC BlueBay Asset Management said most forecasters expect European gas prices in a range of 85 to 100 euros, and that if that proves correct the euro could easily slide to 1.12 dollars.

The Euro weakened against the US Dollar on Wednesday, with EUR/USD declining to around 1.3335 during early Asian trading hours after European Central Bank President Christine Lagarde struck a dovish tone. Germany's August Retail Sales data is due later on Wednesday and is expected to draw market attention. The pair's move lower came as the single currency softened broadly following Lagarde's remarks.

Wells Fargo Investment Institute on Tuesday revised its currency forecasts, projecting additional U.S. dollar strength through the end of 2027 as inflation-driven Federal Reserve rate increases widen interest rate gaps with other developed economies. The firm raised its dollar/euro target to $1.10-$1.14 from a previous range of $1.17-$1.21 for year-end 2027, moved its yen/dollar target to ¥160-¥164 from ¥158-¥162, and lifted its ICE U.S. Dollar Index target to 100-104 from 95-99. Wells Fargo analysts expect the Fed to deliver a full percentage point more in rate hikes into 2027, while the European Central Bank and other central banks are projected to hold rates steady or cut them as their earlier increases slow economic growth next year. The revision follows the August Producer Price Index report showing elevated inflation and the Fed's September 16 rate hike, with interest rate futures markets showing expected U.S. short-term yields outpacing comparable eurozone rates from September 1 through September 24. The analysts said wider rate differentials between the U.S. and other developed economies should attract international investors, and that the U.S. economy can withstand higher borrowing costs, giving the dollar an edge over other currencies.

The US dollar strengthened against major currencies in trading on the New York foreign exchange market on Monday, September 28, as rising oil prices led the market to expect that the US central bank may raise interest rates further to curb inflation. The dollar index rose 0.22% to 101.197, while the US dollar strengthened against the yen to 157.40 yen from 157.13 yen on Friday, and the euro weakened against the US dollar to 1.1368 dollars from 1.1399 dollars. Crude oil prices surged about 3% after President Donald Trump rejected Iran's conditional proposal regarding the reopening of the Strait of Hormuz, before paring gains later. As a result, the yield on 10-year US Treasury bonds jumped above 5.2% to 5.261%, and the 30-year yield reached 5.571%. Several Fed officials signaled support for further rate hikes, with Lisa Cook, a member of the Fed's Board of Governors, saying on Monday that she expects inflationary pressures to continue rising in the coming months due to demand related to artificial intelligence technology and higher oil prices. Meanwhile, the CME FedWatch tool indicated that investors priced in a 70.3% probability that the Fed will raise interest rates by another 0.25% at its October meeting, up from 57.6% last week and 17.7% last month. Analysts expect the September nonfarm payrolls figure, to be released on Friday, October 2, to show an increase of 98,000 jobs, after a gain of 162,000 in August, and expect the September unemployment rate to hold steady at 4.1%.

European Central Bank President Christine Lagarde said on the 28th that this year's inflation has not yet produced dangerous second-round effects across the euro area, so gradual policy action by the ECB remains appropriate. She was speaking at a committee hearing of the European Parliament. Euro-area inflation has already exceeded 3% and could approach 4% by year-end, double the ECB's target. Markets widely expect that, on top of the two rate hikes carried out during the summer, as many as four more increases will be needed over the coming year. Lagarde, however, pushed back against some market expectations for aggressive rate hikes, noting that the surge in crude oil and gas prices stemming from the US-Iran conflict is the main driver of price increases. She added that inflation is expected to rise further but that there are no signs yet that it is becoming entrenched, and that at this stage there is no evidence that energy prices are feeding through to wage growth. She also said the current shock is too large to be dismissed as temporary, while the ECB believes a cautious approach is appropriate to contain inflation, though she acknowledged that inflation indicators are tilted toward upside risks and that uncertainty surrounding the outlook is extremely high. While the definition of a cautious approach is not clear, economists say the first two rate hikes, carried out at three-month intervals, serve as a guide. Lagarde maintained an optimistic view on the economy, saying manufacturing is holding firm, the labor market is solid, and investment should support growth.

Societe Generale has lowered its EUR/USD forecast to 1.15 as Dollar strength continues to force repeated downward revisions across the market. Kit Juckes of Societe Generale noted that the consensus forecast has already shifted from 1.20 to 1.16. Client discussions, he added, suggest that markets are positioned even more Dollar-bullish than the current consensus implies.

Commerzbank lowered its year-end EUR/USD forecast to 1.15 from 1.17, according to Thu Lan Nguyen. Nguyen noted that the Fed's unanimous September rate hike has temporarily restored its credibility and supported the Dollar, weighing on the euro. The revision reflects the bank's view that the Fed's decisive action has bolstered the greenback's appeal.

Societe Generale says Central and Eastern European currencies, including the Hungarian Forint, are set to weaken about 3% against the Euro this week as EUR/USD falls below 1.14. The bank attributes the regional currency weakness to policy risks. The call covers the CEE currency group as a whole, with the Hungarian Forint cited as one of the currencies affected.

Francesco Pesole at ING sees EUR/USD downside risks persisting, with the 1.1320-1.1330 area as key support that could be tested quickly on stronger US data or another sharp Oil move higher. The call comes as French spreads weigh on the euro.