Euro slides to 17-month low as French fiscal fears lift the dollar

The euro fell again on Monday as worries about France's public finances spread through European bond markets. The ECB reference rate for EUR/USD dropped to 1.1204 on 5 October, down 0.19% from Friday's fixing and 1.53% below the fixing five sessions earlier.

What moved and why

FXStreet reports that the Dollar Index hit an 18-month high on French debt fears. France's government debt is close to 120% of annual economic output, and the gap between French and German 10-year borrowing costs reached about 1.5 percentage points on Friday, the widest since 2011, according to the same report.

Brown Brothers Harriman's Elias Haddad, quoted by FXStreet, said EUR/USD briefly touched 1.1161, its lowest since May 2025. He flagged France's budget crisis spilling into wider eurozone bond markets and complicating any activation of the ECB's Transmission Protection Instrument. Investing.com also reported the euro at a 17-month low.

US yields kept the dollar supported. investingLive's European session wrap put the 10-year Treasury yield flat at 5.277%, with AUD leading and EUR and NZD lagging.

The majors

ECB reference rates, fixing of 5 October 2026 versus the previous fixing of 2 October. These are daily fixings, not live quotes.

Sterling's fixing was higher than Friday's, but later in the day FXStreet reported GBP/USD down on the session at 1.3218. AUD/USD traded around 0.6970, up 0.34% on the day, per FXStreet. FXStreet also noted the Canadian dollar outperforming after USD/CAD reversed earlier gains. USD/JPY fixed above 158, and investingLive's Asia wrap said Japanese officials toughened their tone on the yen. Our sister site explains how verbal intervention differs from actual yen buying.

Charts: EUR/USD and DXY.

Central banks and data

• US services: the ISM services PMI came in at 54.9 against a 55.2 estimate and 55.4 prior, investingLive reports. The prices component rose to 74.0 from 72.6. The S&P Global composite PMI was 58.4, the strongest expansion in over five years, per investingLive.
• US jobs: Friday's report showed payrolls up just 29k, but investingLive argues that bond yields remain the market's main pressure point.
• Eurozone: final September composite PMI was 53.1, confirming the fastest growth in nearly three and a half years, investingLive reports. Sentix investor confidence fell to 2.7 against 5.0 expected, per investingLive.
• UK: the final services PMI was revised up to 52.1 from 51.7, with input cost inflation the strongest since June, investingLive reports.
• ECB: chief economist Philip R. Lane delivered a speech titled "Diagnostic Challenges for ECB Monetary Policy". BBH's Haddad cited fewer expected ECB hikes as another weight on the euro.
• Forecasts: Bank of America sees EUR/USD at 1.15 by year-end, according to Investing.com.

What to watch next

1. Fed minutes: investingLive's Asia wrap previews minutes where guidance for one more hike meets softer data, with October hike odds fading.
2. French spreads: whether the France-Germany 10-year gap widens further, and any discussion of ECB backstops.
3. Treasury yields: with the 10-year near 5.28%, bonds remain the key driver for the dollar, per investingLive.
4. Japan: further official comments as USD/JPY holds above 158.