Euro struggles as it faces political, fiscal reckoning
FXE•The euro fell to $1.1219, near a 17-month low, amid concerns about French debt and political uncertainty, including an upcoming Spanish snap election. The dollar strengthened as US Treasury yields rose, despite reduced expectations for a Federal Reserve rate hike this month.
1. Euro faces pressure
The euro edged down to $1.1219 in Asia after reaching its lowest level since May 2025 in the previous session. Concerns about high debt and political gridlock in France, as well as an upcoming snap election in Spain, weighed on the currency; it also fell more than 1% against the pound last week.
2. Dollar supported by yields
The dollar extended its rally as US Treasury yields remained elevated and reached multi-decade highs overnight. The dollar index stood at 102.17 after touching an 18-month high in the previous session. Expectations for a Federal Reserve rate hike this month faded after weaker-than-expected US jobs data, though investors still expected further tightening later.
3. Policy and inflation concerns
A strategist at Commonwealth Bank of Australia said the euro could fall below $1.10, citing oil prices, European monetary policy and budget deficits as factors. Barclays analysts said cost pressures continued to raise doubts about whether conditions would sustain 2% inflation. US services activity slowed in September, while prices paid by businesses for inputs rose.
