Euro Slumps as Dollar Reaches 17-Month High Amid France Fiscal Concerns

The US dollar has reached a 17-month high against its major rivals, including the euro. This marks the fourth consecutive weekly decline for the single currency, with its steepest fall in nearly four months.

The dollar index, which measures the value of the US currency against six others, rose 0.85% this week, its third straight gain since May 2025. The euro, on the other hand, fell 1.17% for the week, its largest drop since early June.

According to Jane Foley, senior forex strategist at Rabobank, the outlook for the euro is 'clearly weakened' due to various factors, including France's fiscal trajectory and the Federal Reserve's hawkish shift in mid-September. Foley pointed out that France's budget and political backdrop have weighed heavily on the currency.

The sell-off of French government bonds has contributed to the euro's decline, with yields rising to their highest level since 2002. This has widened the yield gap between French bonds and safe-haven Bunds to about 150 basis points, a level not seen since the euro area's sovereign debt crisis in 2011.

Investor attention will soon shift to the US payroll report, which is expected to show job growth slowing down in September. The data comes as traders are pricing in a 72% chance of the Federal Reserve standing pat on interest rates this month, following recent downward revisions to consumer price inflation.