The euro slumped toward a 17-month low on Wednesday as French government bonds sold off on fiscal concerns, pushing traders toward the dollar. EUR/USD fell into the lower half of its daily range while markets awaited minutes from the Federal Reserve's September meeting for clues on the path of further rate increases.
The euro slumped 0.65% to $1.1185 on Wednesday, closing in on the 17-month low it touched Monday, as renewed selling in French government bonds dragged the currency lower. The French 10-year yield surged 14.9 basis points to 4.8959%, its biggest daily jump in two weeks, while the German 10-year yield rose 0.8 basis point to 3.489%.
French fiscal fears sink the euro
Juan Perez, senior director of trading at Monex USA, said: "The focus is on Europe, and it’s a very, very negative one." Politicians are struggling to curb the budget deficit ahead of a divisive election in 2027, and a snap election call in Spain added further pressure on the currency.
The euro had rebounded Tuesday after far-right candidate Marine Le Pen raised her spending-cut target to €140 billion ($158 billion) from €125 billion in savings originally planned if she wins power in 2027. Bank of France head Emmanuel Moulin said France's situation is serious given the rise in its borrowing costs, but the country does not currently need help from the European Central Bank.
EUR/USD tests its session low
EUR/USD is trading in the lower portion of today's 98-pip range, from 1.1166 to 1.1264, according to InvestingLive. The 1.1166 session low is the immediate downside reference — a break below it would extend the day's bearish move, while holding it would let buyers attempt to stabilize the price.
Dollar gains ground before Fed minutes
The dollar index climbed 0.41% to 102.33 ahead of the minutes from the Federal Reserve's September meeting, when the central bank raised interest rates for the first time since 2023. Markets now price a 21.6% chance of a rate hike at the Fed's meeting later this month, down from about 38% a week ago. They see an 82.8% chance of a hike in December, according to CME FedWatch.
Recent comments from several Fed officials have favored more rate hikes, but New York Fed President John Williams and Vice Chair Philip Jefferson last week said they preferred patience on additional increases. The dollar was also supported by rising energy prices, as oil advanced on continued Middle East supply risks and a storm approaching U.S. oil-producing regions.
Sterling also weakened, falling 0.45% to $1.3212 against the dollar even as it hit its highest level against the euro since June 2025. The dollar edged up 0.03% against the yen, to 158.16.
Sources: Economy News, InvestingLive
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