EUR/USD Drops to Lowest Level Since May 2025 Amid European Risks

The EUR/USD exchange rate dropped to its lowest level since May 2025, trading around 1.1200 on October 5 after hitting 1.1161 in Asia. This decline marks the fourth consecutive week of losses for the pair, despite a brief slowdown in the dollar’s rise following weak U.S. labor market data.

The U.S. economy added only 29,000 jobs in September, far below the expected 90,000, while unemployment rose to 4.2% and hourly earnings grew by just 0.1% month-on-month. Although these figures reduced the likelihood of a Fed rate hike in October, the euro continued to fall due to heightened European risks.

Political tensions in France and Spain are driving the euro’s selloff. The yield on 10-year French government bonds surged to 4.9%, with a widening spread over German bonds to 146 basis points, increasing the risk premium within the eurozone. Additionally, Spanish Prime Minister Pedro Sanchez announced snap elections for November 29, adding to market uncertainty.

Despite stronger-than-expected Eurozone economic data, including a rise in the September Composite PMI to 53.1 and Services PMI to 53.0, these positives are overshadowed by rising borrowing costs and political risks. The pair found support near 1.1160 but faces resistance around 1.1220, with further declines possible toward 1.1180-1.1160.