Euro Plummets as Fragmentation Fears Intensify Market Pressures

The Euro is facing renewed selling pressure as fragmentation fears tighten financial conditions across the Eurozone. Analysts at OCBC warn that rising borrowing costs and wider risk premia are increasing financial stability concerns, potentially making the European Central Bank (ECB) more cautious about further policy tightening. This has led to the Euro hitting its weakest level against the US Dollar since May 2025, with EUR/USD, EUR/GBP, EUR/JPY, and EUR/CAD all declining in early European trading.

The US Dollar, meanwhile, is holding steady above 102.00 despite a disappointing Nonfarm Payrolls (NFP) report. The September NFP data showed a mere 29K increase in jobs, far below the expected 90K, while the Unemployment Rate rose to 4.2%. However, the USD managed to regain strength after wage inflation softened to 3%, reducing the likelihood of a Fed rate hike in October to below 20%. Economists at DBS suggest the USD’s recent rally may be losing momentum as Fed officials push back against expectations of further hikes.

Gold (XAU/USD) extended its losses, falling more than 3% over two consecutive weeks, though it showed modest recovery gains above $4,160. USD/JPY remained volatile, fluctuating above 157.50, as Japan’s Chief Cabinet Secretary Minoru Kihara ruled out additional crude oil releases from national reserves. Meanwhile, the Euro’s struggles highlight the broader challenges facing the currency amid rising fragmentation risks and cautious monetary policy expectations.