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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →The euro’s latest decline reflects France-specific fiscal and political risk layered on top of a global bond selloff. The dollar, meanwhile, has remained firm even as weaker US jobs data reduced expectations for an October Federal Reserve rate hike: elevated Treasury yields, demand for US securities and safe-haven buying have provided support. These are competing forces, not a contradiction—and neither exchange rates nor market-implied rate probabilities are policy decisions.
The figures below are dated snapshots from Reuters reports published October 1–5, 2026, not live quotes.
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How far has the euro fallen?
Reuters reported that EUR/USD touched $1.1161 in Asian trading on October 5, 2026, its weakest level since May 2025, before trading around $1.12. The pair had recorded four consecutive weekly losses against the dollar. This was an intraday observation, not a closing price. Reuters, republished by Investing.com, October 5, 2026.
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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteA separate Reuters dispatch that morning reported an overnight 17-month low of $1.1160 and then put the pair at $1.1208. Those are separate report snapshots; the one-cent difference between the reported lows should not be mistaken for a single precise consolidated quote. Reuters, republished by Investing.com, October 5, 2026.
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For broader context, Reuters said the euro fell nearly 2.5% in September 2026, its largest monthly decline since July 2025, as the dollar rose during a global bond selloff. That is a reported monthly move, not a forecast. Reuters, republished by Investing.com, October 1, 2026.
Why is the euro falling against the US dollar?
France’s fiscal and political risks are weighing on the euro
Reuters linked part of the euro’s weakness to uncertainty over France’s public finances and politics ahead of the 2027 election. Investors were concerned about the country’s ability to implement deficit-reduction measures; a divided parliament was seen as making compromise difficult. That can raise the risk premium investors demand for French assets and weigh on the shared currency. It is a market concern, not evidence that France faces an imminent sovereign crisis.
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The French-German 10-year government bond yield spread helps illustrate that concern: it measures the extra yield investors demand to hold French debt rather than German Bunds. Reuters reported that the spread widened to about 150 basis points on Friday, the highest since the euro-area sovereign debt crisis in 2011, and later stood at 145.50 basis points in its October 5 report. The peak and later reading are distinct observations. Reuters, republished by Investing.com, October 5, 2026.
As Saxo strategist Neil Wilson put it in Reuters’ October 5 report: “France is the real deal in terms of risk premia for the euro.”
A wider bond selloff added pressure
The euro’s decline also unfolded during a broader selloff in government bonds. Reuters cited concerns about public finances, heavy issuance and elevated energy costs. On October 1, higher oil prices and inflation concerns were among the factors pushing yields higher in both the United States and Europe. Because the euro area relies on imported energy, higher energy costs can be an additional headwind for the currency, but they are not the sole explanation for this episode. Reuters, republished by Investing.com, October 1, 2026.
Why is the dollar strong if Fed rate hike bets are easing?
Weaker-than-expected US September job growth, along with downward revisions to employment figures for the previous two months, led traders to reduce expectations for another Federal Reserve hike in October. But rate expectations are only one influence on currency prices. Reuters also pointed to elevated US Treasury yields, foreign appetite for US securities and safe-haven flows as investors sold bonds globally. One Reuters dispatch described the dollar index as reaching its highest level since April 2025. Reuters, republished by Investing.com, October 5, 2026.
In other words, markets could see less chance of an immediate Fed hike while still favoring the dollar because US yields remained elevated and investors sought US assets. The direction of short-term policy expectations does not mechanically determine the exchange rate.
BBH global head of markets strategy Elias Haddad told Reuters: “Tighter policy elsewhere and a growing case for an October Fed pause are US dollar headwinds. But US growth outperformance and strong foreign appetite for US securities keep U.S. dollar risks skewed to the upside.” Reuters, October 5, 2026.
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What markets expected from the Fed and ECB
Reuters’ October 5 reporting gave two different snapshots of CME FedWatch pricing: one dispatch said markets implied an 80% chance of the Fed holding rates in October, compared with 36% a week earlier; another put the chance of a hike at 18%, compared with 64% the prior week. These are separately reported framings and should not be combined as if they were one synchronized reading. They describe market pricing, not a Federal Reserve decision. Reuters, republished by Investing.com, October 5, 2026.
On October 2, Reuters reported that LSEG data showed markets pricing an 81.8% chance of an ECB rate hike in December. That too was a time-specific market-implied probability, not a commitment by the European Central Bank. Reuters, republished by Investing.com, October 2, 2026.
Quick Recap
How to read the EUR/USD move
- Separate local risk from global pressure: France’s fiscal and political uncertainty was a euro-specific concern, while the bond selloff and higher energy costs affected markets more broadly.
- Distinguish expected policy from current yields: Lower odds of an October Fed hike did not erase support for the dollar from elevated Treasury yields or demand for US securities.
- Keep the measures distinct: EUR/USD tracks the euro against the dollar; the dollar index measures the dollar against a basket. A move in one is not identical to a move in the other.
- Treat probabilities and prices as dated observations: The quoted exchange rates and central-bank expectations came from Reuters dispatches published October 1–5, 2026, and can change quickly.
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