Economic Situation
All major currencies gained ground against the euro last week, and the euro itself slipped this Monday below 1.12 dollars, its lowest level since May 2025.
A strong dollar alone would not account for such a broad decline: the weakness originates from the eurozone itself.
Europe buys almost all of its energy abroad and settles those purchases in dollars. Each uptick in prices forces it to acquire more American currency, which in turn weakens the euro and fuels European inflation, at 3.8%.
High energy costs and a weak euro stem from the same root, and both add to the price tag of services purchased outside the euro area.
There are also two immediate reasons. First: the European Central Bank does not want to rush its tightening. It has raised its rate twice since June, but Christine Lagarde advocates for a “measured response,” as credit already becomes more expensive even before high energy translates into higher wages. Investors hardly expect another rate increase this month: the probability dropped from 60% to 18% for October, versus 73% for December.
The second: France’s debt. The spread between France and Germany on ten-year borrowing widened by 0.34 point over five sessions, to nearly 1.41 points on Friday, and the budget will only be examined by Parliament starting October 13.
The tension remains, in our view, and also according to State Street, a French affair.
Three escape hatches remain open for the euro: cheaper energy, a calmer French debt, or a weaker dollar.
Friday provided a test for the third option: the U.S. economy created only 29,000 jobs, and yet its currency did not retreat. Winter purchases are therefore being built on a persistently weak euro.
A strong dollar alone would not account for such a broad decline: the weakness originates from the eurozone itself.
Europe buys almost all of its energy abroad and settles those purchases in dollars. Each uptick in prices forces it to acquire more American currency, which in turn weakens the euro and fuels European inflation, at 3.8%.
High energy costs and a weak euro stem from the same root, and both add to the price tag of services purchased outside the euro area.
There are also two immediate reasons. First: the European Central Bank does not want to rush its tightening. It has raised its rate twice since June, but Christine Lagarde advocates for a “measured response,” as credit already becomes more expensive even before high energy translates into higher wages. Investors hardly expect another rate increase this month: the probability dropped from 60% to 18% for October, versus 73% for December.
The second: France’s debt. The spread between France and Germany on ten-year borrowing widened by 0.34 point over five sessions, to nearly 1.41 points on Friday, and the budget will only be examined by Parliament starting October 13.
The tension remains, in our view, and also according to State Street, a French affair.
Three escape hatches remain open for the euro: cheaper energy, a calmer French debt, or a weaker dollar.
Friday provided a test for the third option: the U.S. economy created only 29,000 jobs, and yet its currency did not retreat. Winter purchases are therefore being built on a persistently weak euro.
FX Rates: The Technical Outlook
Two thresholds gave way in rapid succession against the dollar.The 1.13 level collapsed last week, with Friday’s session closing at 1.1253.
The year’s floor of 1.1216 was breached this Monday morning during Asian trading, the rate slipping to 1.116.
Up next are the hurdles at 1.11 and 1.10. North American hotel, cruise and incoming services priced in dollars thus cost more than in September.
The move isn’t limited to the dollar alone. On Wednesday, the euro hit its best level of the year against the Swiss franc, at 0.9486, only to shed 1.33% the following day; today it trades around 0.929 franc.
Over the week it also fell 1.17% against the British pound, and 0.45% against the Canadian dollar. It stands this Monday at 0.846 pounds, barely above its annual low of 0.8455.
Waiting for a rebound is essentially a bet on one of the three exit doors mentioned above. Splitting purchases, rather than committing all at once, reduces the risk this bet entails but does not eliminate it.
Dubai clearly illustrates the direct impact of this slide. The United Arab Emirates dirham has been pegged to the dollar since 1997, at 3.6725 dirhams per dollar, and it remains fixed.
A stay in the Emirates therefore tracks the euro against the dollar exactly, with no cushion: today it takes about 4.10 dirhams for one euro, versus nearly 4.13 on Friday. For departures already booked, the margin shrinks accordingly.
| WEEKLY SUPPORTS | WEEKLY RESISTANCES | |||
| S2 | S1 | R1 | R2 | |
| EUR/USD | 1.1028 | 1.1140 | 1.1366 | 1.1478 |
| EUR/GBP | 0.8329 | 0.8414 | 0.8584 | 0.8669 |
| EUR/CHF | 0.9140 | 0.9234 | 0.9420 | 0.9514 |
| EUR/CAD | 1.5714 | 1.5875 | 1.6195 | 1.6356 |
| EUR/JPY | 174.09 | 175.86 | 179.42 | 181.19 |
The supports and resistances shown below indicate, respectively, the lower and upper points within which prices are expected to move during the week.
The information presented in this publication is provided for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should in no case be used as a basis or be considered an inducement to engage in any investment.
Mondial Change is a French financial establishment, founded in 2015, specializing in the management of international payments and exchange risk.
Mondial Change supports a wide range of tourism players, travel agencies, tour organizers, tour operators, and inbound operators…
www.mondialchange.com
Contact : [email protected]
Mondial Change supports a wide range of tourism players, travel agencies, tour organizers, tour operators, and inbound operators…
www.mondialchange.com
Contact : [email protected]
