EUR/USD hits lowest level since May 2025 as European risks intensify

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EUR/USD extends decline to new lows

Weak U.S. jobs report fails to lift euro

⠀The U.S. economy added just 29,000 jobs in September versus roughly 90,000 expected by the market, while unemployment rose to 4.2% and average hourly earnings increased by only 0.1% month-on-month and 3.0% year-on-year. These figures significantly reduced the probability of a Fed rate hike as early as October, but EUR/USD continued to decline anyway, as the market is currently reacting more strongly to European risks.⠀

Political tension increases pressure on euro

⠀The main driver behind the euro selloff has been political and debt-related tension in France, compounded by a new source of uncertainty in Spain. The yield on 10-year French government bonds rose to around 4.9%, while the spread over German bonds widened to approximately 146 basis points, once again forcing investors to price in an additional risk premium within the eurozone. At the same time, Spanish Prime Minister Pedro Sanchez announced snap parliamentary elections for November 29 following renewed difficulties for the government in parliament. As a result, the market is effectively ignoring some of the positive economic signals and selling the euro because of the risk of further widening in sovereign spreads and greater political fragmentation across the region.⠀

Eurozone data remain stronger than currency

⠀Eurozone macroeconomic data look considerably better than the currency itself. September Composite PMI rose to 53.1 from 52.0, while Services PMI increased to 53.0 from 51.6, pointing to faster business activity and a relatively resilient services sector. Under normal conditions, such data could support expectations of a more hawkish ECB stance, but for now they are being overshadowed by rising borrowing costs and political risks. Stronger economic activity is also coinciding with elevated inflationary pressure, limiting the ECB’s room to ease policy while making further rate hikes more difficult against the backdrop of stress in European bond markets.⠀After finding support near 1.1160, the pair rebounded toward resistance around 1.1220, where selling pressure remains. The nearest support is currently located around 1.1200, and the risks of a break below this level followed by a decline toward 1.1180–1.1160 remain high. A break above resistance would open the way toward 1.1240–1.1260, where renewed selling is also possible. The outlook for the pair, as stated in EUR/USD extends decline as bond sell-off keeps dollar in control, remains negative.

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