|

Euro: Downside risks persist against US Dollar – Commerzbank

Commerzbank’s Thu Lan Nguyen notes EUR/USD briefly slipped below 1.12 again, with weakness driven mainly by Euro-specific concerns rather than US rate expectations. France’s fiscal sustainability and Marine Le Pen’s proposals are keeping markets nervous, while FOMC minutes reduced the perceived probability of near-term Fed hikes. Overall, Commerzbank judges near-term risks for EUR/USD as skewed to the downside.

France risks keep Euro pressured

"Yesterday, EUR/USD once again briefly slipped below the 1.12 mark. As was the case late last week, the move was primarily driven by euro weakness. The reason appears straightforward: persistent concerns about France’s fiscal sustainability."

"This view was reinforced by the FOMC minutes released yesterday. While many policymakers continued to favour another rate increase this year, the timing remains uncertain. Moreover, single additional rate hike was mentioned rather than the multiple hikes that markets are still pricing in."

"In the near term, however, attention is likely to remain focused on France. The ambitious fiscal plans unveiled by Marine Le Pen, who currently leads in presidential election polls, provided only temporary relief. One reason may be that she simultaneously called on the ECB to intervene in order to give euro area governments greater fiscal room for manoeuvre."

"At the same time, France’s central bank governor downplayed the need for ECB intervention and spoke out against political pressure on the central bank. Against this backdrop, continued market nervousness comes as little surprise. A lasting solution to the issue remains elusive for now. As a result, near-term risks for EUR/USD remain skewed to the downside."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

AUD/USD consolidates above 0.6950 amid risk aversion

AUD/USD consolidates in the Asian session on Thursday, trading just above 0.6950 as traders assess developments in the Middle East crisis. The Pentagon reportedly ordered readiness for potential strikes against Iran. This keeps the geopolitical risk premium in play, which, along with hawkish FOMC Minutes and elevated US bond yields, will likely keep the US Dollar underpinned at the expense of the pair.

USD/JPY slips below 158.00 as USD retreats

USD/JPY returns to the red below 158.00 in the Asian session on Thursday amid speculation that authorities will step in to prop up the Japanese Yen. Meanwhile, the US Dollar eases from near an 18-month high on profit taking, ignoring Wednesday's hawkish FOMC Minutes and the risk of a further escalation of tensions in the Middle East, adding to the pair's pullback.

Gold bulls remain on the sidelines as hawkish Fed and Middle East jitters underpin USD

Gold trims its intraday gains and trades near $4,125 during the early European session on Thursday, up around 0.35% for the day. A combination of factors helps the US Dollar retain a bullish undertone, which keeps a lid on the precious metal's bounce from a two-month low, touched the previous day.

Ripple and Stellar test key support amid rising downside risks
Ripple (XRP) and Stellar (XLM) remain under pressure and extend their corrections on Thursday as weakening derivatives metrics and broader macroeconomic headwinds weigh on sentiment. XRP and XLM approach a key support zone after three consecutive days of losses so far this week.
The UK 30-year gilt just hit a 1998 high. Is that good or bad for the British Pound?
The yield on the UK's 30-year government bond, or gilt, went through 6% on October 1 for the first time since early 1998, and on Monday the Pound was at its strongest against the Euro since June 2025. The gilt market's 28-year high is mostly someone else's. Since early May, the 30-year gilt yield has risen about 0.15 of a percentage point and the US 30-year about 0.7.
The UK 30-year gilt just hit a 1998 high. Is that good or bad for the British Pound?
The yield on the UK's 30-year government bond, or gilt, went through 6% on October 1 for the first time since early 1998, and on Monday the Pound was at its strongest against the Euro since June 2025. The gilt market's 28-year high is mostly someone else's. Since early May, the 30-year gilt yield has risen about 0.15 of a percentage point and the US 30-year about 0.7.