Euro heads for fifth weekly decline as oil recovers from lows

The euro was heading for a fifth consecutive weekly decline against the dollar in currency trading on Friday, October 9, as early gains faded alongside a recovery in oil prices from their intraday lows. Reuters reported that French debt concerns and US interest-rate expectations remained in focus, even as France’s bond market steadied.

The currency was last down 0.15% at $1.1192, leaving it about 0.5% lower for the week. A fifth weekly loss would be its longest run of declines against the dollar since the start of 2025, according to Reuters. Those figures were an intraday snapshot, not Friday’s closing result.

Since the euro’s fall to a 17-month low covered in our earlier report, pressure on French government bonds has eased, but the currency has remained on course for another weekly loss. Reuters put Monday’s low at $1.1161 and linked the selling to France’s debt burden and the political difficulty of budget cuts, alongside a robust-looking US economy.

Oil rebounds while traders watch the Federal Reserve

US crude was down 0.13% at $91.37 a barrel after touching $90.01 earlier in the session. Brent was down 0.15% at $104.10 after falling to $102.33. Both benchmarks therefore remained lower on the day despite recovering from their lows; the quotations were not settlement prices.

The dollar index, which measures the US currency against a basket of currencies, rose 0.18% to 102.30. It was about 0.3% higher for the week and heading for a fourth consecutive weekly gain, its longest such run since May 2025, Reuters reported.

CME FedWatch pricing cited by Reuters indicated a 19.4% probability of a Federal Reserve increase of at least 25 basis points at its October meeting and an 85.8% probability of an increase at the December meeting. These were market-implied probabilities at the time of the report, rather than commitments by policymakers.

France’s debt figures explain the fiscal backdrop

Risk premiums on French and Italian government debt were heading for weekly declines after jumping in late September. Reuters reported that investors were waiting for further developments before demanding greater compensation for fiscal and political risks. French politicians were still struggling to reduce the budget deficit ahead of a divisive 2027 election.

France’s national statistics agency, INSEE, put general government debt at €3,595.5 billion at the end of June in its September 29 release. Debt increased by €59.6 billion during the second quarter, taking the ratio to 119.0% of gross domestic product from 117.5% in the first quarter.

Central government accounted for €53.0 billion of the quarterly increase. Social security funds added €8.4 billion, while local government debt fell €1.7 billion. The increase was therefore concentrated rather than shared across every tier of government.

Net public debt rose by €68.2 billion to 111.4% of GDP. INSEE cautioned that quarterly figures can be revised and that changes in debt alone cannot establish the government deficit. These figures describe the end of June, rather than France’s debt position during Friday’s trading.

ECB forecasts show why energy prices matter

The European Central Bank’s September staff projections provide a separate view of the energy pressures facing the euro area. Staff expected inflation to peak at 3.6% in the fourth quarter of 2026 because of energy-price pressures associated with the Middle East conflict.

The baseline projected annual inflation of 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, with real GDP growth of 0.9%, 1.4% and 1.5%, respectively. These are forecasts. They assume that the energy shock diminishes, an assumption staff explicitly described as highly uncertain.

Staff expected energy-price changes to reach consumer energy bills quickly, with effects on other prices emerging more gradually. They anticipated subdued near-term consumption because of purchasing-power pressures and uncertainty, followed by a recovery supported by real incomes and employment.

The ECB’s alternative scenarios indicated that a sharper, more persistent energy shock would mean higher inflation and weaker subsequent growth than the baseline. Those conditional projections do not establish that Friday’s oil rebound will produce those outcomes.

What remains unsettled

Friday’s final currency closes and oil settlements will determine whether the reported weekly trends hold. The Reuters snapshot does not quantify how much of the euro’s movement came from oil, French politics or monetary-policy expectations. INSEE’s next quarterly debt release is scheduled for December 18.