Ukrainian President Volodymyr Zelenskyy said President Donald Trump tried to pressure Kyiv to surrender to Russia, and the euro weakened. Meanwhile, demonstrations across several French cities turned into clashes with police, among the worst street violence in years.
The currency has been lagging for a while. It trailed every other G10 currency over the past month and touched its lowest level since May 2025 last week.
Rodrigo Catril at National Australia Bank linked the euro's pressure to US support for Moscow, which he said spurred Ukraine to ramp up drone attacks on Russian energy infrastructure, likely adding to worries about higher oil prices. Add in French protests that complicate austerity plans, and he said the euro could slip below 1.11.
Hedge funds are leaning bearish. Commodity Futures Trading Commission data through Oct. 13 show positioning is the most negative since July. Bloomberg's Mark Cranfield said traders are watching the 1.1113 low set last week, and getting there may be easier today with no significant option strikes below spot.
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In the early session, French bond futures were down as far as 52 ticks. This comes as the National Assembly began debating next year's budget last week, which carries €43 billion ($48.2 billion) in measures aimed at shrinking the deficit and easing market concerns about public finances.
Paris has little fiscal room because the swelling deficit itself is spooking investors, even as pressure builds from high living costs and student dissatisfaction. The calendar does not help, with a presidential election due in April and a hung Parliament that often blocks compromise. In a note, Barclays strategists under the leadership of Themistoklis Fiotakis wrote, "France's fiscal problems are daunting enough in their own right, but are made even harder to fix by the upcoming presidential election and a hung Parliament, where consensus-building has often proved to be an impossible task." They added, "The medium-term outlook remains negative" for the euro.
Europe's geopolitical stress is landing just as expensive energy threatens growth. Tensions between Ukraine and the US hit a low after President Donald Trump reached an agreement with Vladimir Putin whereby Washington would hold off on further tightening sanctions against Russia, while Moscow, in exchange, would channel constrained amounts of diesel into the international market to help tamp down rising prices. Any further rise in European geopolitical risk could boost demand for havens and weigh more on the euro.
Bottom line for your portfolio: a soft euro, strained public finances in France, and oil risk form a mix that keeps currency downside in play and makes policy signals in Europe matter even more for FX positioning.
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