The dollar is heading for a fourth straight weekly gain against the euro, lifted by rising US Treasury yields and a bond-market selloff in Europe. The euro faces its longest weekly losing streak since mid-May 2025, pressured by French political risk and higher oil prices.
The dollar was on track for a fourth straight weekly gain against the euro on Friday, supported by elevated US Treasury yields amid a selloff in European government bond markets and expectations that the Federal Reserve will hold its hawkish rate stance.
However, the greenback trimmed some of its gains after data showed US job growth in September fell short of economists' expectations, and the unemployment rate edged up to 4.2%. Benchmark 10-year Treasury yields slipped after the report before rising 5.14 basis points to 5.285%.
Euro extends its losing streak
Still, the dollar remained underpinned by yields hovering near multi-decade highs, rising concern over the fiscal outlook in parts of Europe, and higher oil prices. The jump in crude has pushed some investors to cut exposure to currencies of major energy importers, including the euro and the yen.
The euro is on track for its fourth straight week of losses against the dollar, the longest such stretch since mid-May 2025. It was last up 0.13% at $1.12580.
Dominic Bunning, head of G10 FX strategy at Nomura, described the September jobs report as a Goldilocks set of numbers: resilient activity without significant inflationary pressure. According to Bunning: "That's a good backdrop from a broad economic perspective." He added it probably does not change Fed pricing much but removes some tail risk around another hike in October.
Markets, meanwhile, now see the central bank holding steady this month. Traders are pricing an 86% chance the Fed holds rates steady, compared with 36% a week earlier, according to CME Group's FedWatch tool, even after the Fed raised rates and signaled more hikes last month, with Fed Chair Kevin Warsh reaffirming monetary policy independence despite repeated calls from President Donald Trump for lower borrowing costs.
Against other currencies, the dollar weakened 0.30% to 0.8285 against the Swiss franc and slipped 0.15% to 157.81 against the yen, though it remains on track for a third straight weekly increase against the Japanese currency.
France's bond rout deepens pressure on the euro
European countries agreed on Friday to release diesel stocks after President Trump pressed governments to act, in a bid to cool fuel prices linked to the Iran war. Euro zone inflation is likely to rise in the coming months, keeping pressure on the European Central Bank to raise rates.
French and Italian government bonds have come under selling pressure in recent weeks on expectations of rising policy rates and growing political risk as 2027 elections loom, with French 10-year yields jumping Thursday to their highest level since 2002.
The premium of French 10-year yields over German safe-haven bonds rose above 150 basis points on Friday, its highest since late 2011, as worries about France's finances and political turmoil grew. The euro was down 0.15% against the Swiss franc at 0.9327 but flat at 177.67 against the yen, headed for weekly losses against both currencies.
Source: Investing.com
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