EUR/USD UNDER PRESSURE AS FRENCH FISCAL CONCERNS COMPLICATE ECB OUTLOOK
EUR/USD remains under heavy selling pressure as concerns over France’s fiscal outlook and rising fragmentation risks push sovereign borrowing costs and risk premia higher. According to OCBC, tighter financial conditions could make the European Central Bank more cautious about further policy tightening.
The Euro has fallen to its weakest level since May 2025, with broad-based selling also weighing on EUR/GBP, EUR/JPY and EUR/CAD. The shift in ECB policy expectations has become an important factor for the Euro as markets assess financial stability and interest-rate differentials.
US employment data also remains in focus. September NFP increased by just 29,000, well below the 90,000 market expectation, while the Unemployment Rate rose to 4.2%. Annual wage growth eased to 3.0%, below the 3.2% estimate.
Although the weaker jobs data initially pressured the US Dollar, the USD regained ground and the US Dollar Index remained above 102.00. CME FedWatch data cited in the source showed the probability of a 25-basis-point Fed rate hike in October falling below 20%.
From a market perspective, the different policy outlooks between the ECB and Federal Reserve remain important for EUR/USD. DBS also noted that higher Treasury yields driven by Fed tightening can support the USD, while yields driven by fiscal and debt-market concerns may have different implications for the Dollar.
For market participants, the key factors remain EUR/USD near its weakest level since May 2025, French fiscal conditions, ECB policy expectations, the USD above 102.00, October Fed rate expectations and US employment data, which may provide further context for the near-term direction of EUR/USD.
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