The euro has reached a 17-month low against the US dollar, hitting 1.1161 on October 5, which marks its weakest position since May 2025. Over the past five weeks, the currency pair has declined by more than 3%, trading near 1.1182 on Monday. Analysts attribute this trend primarily to internal European economic pressures rather than dollar strength.
Economic instability in France is a key factor, as the spread between French and German 10-year bond yields has reached levels comparable to the 2012 debt crisis. Investors are expressing concerns over the 2027 French budget. Additionally, Italy is planning a larger deficit, and Spain has scheduled a snap election for November 29, further weighing on the currency.
Monetary policy divergence remains significant. The Federal Reserve raised rates in September and signaled further hikes, while the European Central Bank has downplayed the possibility of an October rate increase. Rising energy costs, with Brent crude exceeding $100, are simultaneously fueling inflation and threatening economic growth across the region.
Technical indicators suggest a bearish outlook. On the weekly chart, the euro is approaching the 1.1110 support level, with potential further declines toward 1.08 and 1.0509 if this threshold fails. The daily chart shows the pair trading within a descending channel, with the 20-day moving average acting as a resistance point near 1.13.
Financial institutions hold conflicting forecasts for the pair. MUFG analysts predict a drop to 1.10 if bond spreads continue to widen, whereas ABN AMRO expects the euro to reach 1.15 by the end of the year. Upcoming US inflation data on October 14 and central bank meetings on October 28 and 29 are expected to influence future market direction.
