Euro holds steady as markets assess French budget risks and Fed outlook

Modest gains in EUR/USD persist through the American session, supported by continued US Dollar weakness.
Lower Treasury yields weigh on the Greenback, although expectations of additional Fed tightening cushion the decline.
Uncertainty surrounding France’s budget, alongside worries about slower growth, constrains the Euro’s rebound.

EUR/USD trades near 1.1223 at the time of writing. The pair is up 0.10% on the day, retaining modest gains in Tuesday’s American session as the US Dollar (USD) struggles to recover from its recent retreat. France’s fiscal and political difficulties nevertheless leave sentiment towards the Euro (EUR) fragile, restricting further upside.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Retreating US Treasury yields continue to weigh on the Greenback. Having approached 103 last week, its highest since April 2025, the US Dollar Index (DXY) now stands near 101.76, a daily decline of 0.23%. The index measures the Greenback against a basket of six major currencies. The benchmark 10-year US Treasury yield has also eased, trading near 5.08% compared with around 5.36% earlier this month.

Further declines in the US Dollar and Treasury yields appear constrained, however. Rising energy prices are intensifying inflation risks, strengthening expectations that the Fed could raise rates again before year-end. On Tuesday, West Texas Intermediate (WTI) Oil advanced towards $100, its highest in more than a month. Houthi attacks on Saudi energy infrastructure, together with more frequent attacks on vessels in the Strait of Hormuz, are driving concerns about supply disruption.

Despite those risks, traders anticipate no rate change at the Fed’s October 27-28 meeting, following September’s increase of 25 basis points (bps). In a Reuters poll released on Tuesday, 94 of 100 economists predict rates will stay at 3.75%-4.00% this month. Every respondent expects a December increase.

In France, conditions have stabilised somewhat after authorities introduced curfews in response to widespread protests, providing some relief in Europe. Focus nevertheless remains on the proposed 2027 budget and lawmakers’ ability to agree on measures to strengthen public finances.

With inflation still above the European Central Bank’s (ECB) 2% target, energy-related price risks leave further rate increases in consideration. Following two increases this year, economists broadly anticipate a pause in October before another rise in December.

Higher borrowing costs, however, also threaten growth. Speaking on Saturday, ECB President Christine Lagarde said, “While growth has been resilient, financing conditions have tightened.” The remarks highlight the challenge of containing energy-driven inflation without undermining economic activity.

Euro: Today’s Currency Performance

Today’s percentage moves in the Euro (EUR) against the major currencies listed appear in the table below. The Euro recorded its strongest performance against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.18%	-0.66%	-0.39%	-0.50%	-0.32%	-0.45%	-0.51%
EUR	0.18%		-0.50%	-0.21%	-0.32%	-0.11%	-0.27%	-0.33%
GBP	0.66%	0.50%		0.30%	0.18%	0.40%	0.26%	0.16%
JPY	0.39%	0.21%	-0.30%		-0.13%	0.08%	-0.09%	-0.14%
CAD	0.50%	0.32%	-0.18%	0.13%		0.20%	0.05%	-0.02%
AUD	0.32%	0.11%	-0.40%	-0.08%	-0.20%		-0.16%	-0.21%
NZD	0.45%	0.27%	-0.26%	0.09%	-0.05%	0.16%		-0.06%
CHF	0.51%	0.33%	-0.16%	0.14%	0.02%	0.21%	0.06%

Percentage movements between major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. To read EUR (base)/USD (quote), for example, start with the Euro on the left and follow its row across to the US Dollar column. The intersecting cell gives the percentage change for that pair.