Euro hits 1.1161, its lowest since May 2025, on French fiscal fears

France's fiscal worries made the euro the session's weak spot: EUR/USD briefly touched 1.1161, its lowest since May 2025, according to Brown Brothers Harriman (BBH), and Investing.com said the dollar rose as the euro fell. Action Forex put the odds of an October Fed hike at just 17.7%, yet Treasury yields climbed to multi-year highs, FXStreet reported after the close.

What the data showed

• The UK's final services purchasing managers' index (PMI) came in at 52.1 for September, above the 51.7 flash reading but below August's 52.5, investingLive reported.

• The Institute for Supply Management (ISM) services index slowed to 54.9 in September from 55.4, below the 55.1 forecast cited in our weekly wrap but above Wells Fargo's 54.5, while its prices component jumped to 74.0 from 72.6, investingLive and Action Forex reported.

The euro and France

• The euro underperformed the other majors, said BBH's Elias Haddad, with EUR/USD briefly reaching 1.1161; he pointed to fiscal stress and fewer hikes from the European Central Bank (ECB). FXStreet reported the euro falling sharply as the gap between French and German bond yields widened.

• Against the pound, the euro slid to its lowest since mid-July on political turmoil and worries over Europe's public finances, FXStreet said; on our feed it touched 0.8458, after closing Friday just under 0.8500. EUR/JPY, around 176.70 in Asian hours according to FXStreet, closed lower for a seventh straight session on our feed, at 177.18.

• Traders have taken about a quarter point out of their ECB forecasts since mid-September, betting that financial stress will stop the hikes, according to FXStreet, which argued that the 2022-23 experience says they will be wrong.

• After the close, FXStreet said hedge-fund selling in Asia had set off option barriers that deepened EUR/USD's fall to 1.1161, and that the pair then recovered more than half of it, back above 1.1200.

The dollar, the Fed and yields

• The Dollar Index gathered strength above 102.00 on safe-haven flows early in Asian hours and later hit an 18-month high near 102.50, FXStreet said. BBH said upside risks to the dollar persist after the index set new cycle highs last week.

• Action Forex said the odds of an October Fed hike had collapsed to 17.7%, but markets still priced an 82.7% chance of at least one more hike by December. After the close, FXStreet put the October odds at about one in five, down from about two in three at the end of September.

• US Treasury yields rose on Monday as inflation expectations climbed with the ISM survey's input prices, and an FXStreet wrap-up published after the close put the 10-year and 30-year at multi-year highs. No headline gave a closing level: by midday in Europe investingLive had the 10-year yield flat at 5.277%, still under Thursday's 5.33%, its highest since 2002 in our weekly wrap.

• Gold drew slight support from the fading October bets, Action Forex said, but a bearish trendline capped its attempts to recover Friday's post-payrolls losses, and the December pricing kept any rebound small. On our feed it closed at $4,140.64, slightly below Friday's $4,147.62, and its high of $4,170 stayed short of the $4,200 area that turned it back last week.

• Oil sent mixed signals: WTI slipped to around $89.00, near a four-week low, after the G7 tapped emergency reserves, FXStreet said, while investingLive had Brent up 0.3% at $102.60 by midday in Europe.

The pound and the Aussie

• GBP/USD opened the week at 1.3237, recovering from three-month lows, Action Forex said. Later it was down more than 0.19% as France's fiscal shock lifted the dollar, FXStreet reported.

• A holiday in Sydney thinned Australian dollar liquidity, investingLive noted, and AUD/JPY fell below 110.00 to around 109.70 in the early European session, according to FXStreet.

Market gauges and what's next

Our proprietary metrics at the close of the session:

• Readings: an MRS of 69, the same as Friday; a CTS of 54, also unchanged; and an FSI of 58, Neutral, after Friday's 62 in Greed.

• Top of our strength table: on Monday, when it briefly touched its lowest since May 2025, the euro spent 318 of the 1,434 session minutes our feed covered on top (22%), its second straight session in the lead after Friday's 309.

• Bottom: no currency clearly trailed. The euro also spent the most minutes in last place, 246 (17%), which made it the session's swing currency; the table counts minutes in each place, not how far a currency moved.

• The dollar: third, on top for 184 minutes.

• Last week's test: our weekly wrap named 1.1215, Thursday's EUR/USD low, as the euro's test, and the test is a session close below it. Monday's 1.1161 came in Asian hours and also went through 1.1185, the downside target the wrap quoted from Action Forex; on our feed the pair closed the session at 1.1223, above both, so the level held on the first session of the week.

Still ahead: Bank of Japan Governor Ueda is scheduled to speak on Tuesday at 06:35 UTC, and Action Forex expects Wednesday's Fed minutes to test the market's view of a rate plateau.