Dollar and G10 FX: DXY, Euro, Sterling Daily — 2026-10-05
The US dollar extended its rally to a 17-month peak as soft US payrolls on Friday failed to derail the greenback, with elevated Treasury yields keeping DXY firm despite reduced Fed rate-hike bets. The euro tumbled to its lowest level since May 2025 (1.1161 USD), weighed down by mounting French fiscal concerns, while sterling struggled below 1.3250 as positioning data shows currency shorts building in both EUR/USD and GBP/USD futures.
Dollar and G10 FX: DXY, Euro, Sterling Daily — 2026-10-05
Top developments
US Payrolls Miss, But Dollar Holds Firm on Yield Support
Weak US nonfarm payroll figures on Friday (October 4) cut October Fed rate-hike expectations, yet the dollar held gains, with DXY revisiting levels last seen in April 2025. The soft employment data should have weakened the greenback, but elevated Treasury yields—supported by structural supply concerns and persistent inflation—have kept USD bulls in control.
Euro Slides to 17-Month Low on French Debt Crisis
EUR/USD collapsed to 1.1161—its lowest point since May 2025—as concerns over France's mounting fiscal challenges and political instability weighed on the single currency. The euro entered Q4 at a "crossroads" between competing Fed and ECB policy paths, but France's debt crisis has tipped the scales toward euro weakness. German-language analyst XTB noted the euro is at its lowest level since May 2025 amid the French budget crisis, with the currency facing significant headwinds.
Sterling Weakens as GBP/USD Tests Major Support
GBP/USD remained under pressure, trading below the 1.3250 level, with limited recovery traction following the softer US jobs report. The pound has faced headwinds from diverging Fed-BoE policy expectations and positioning dynamics.
US Dollar Bulls Surge as EUR/GBP Shorts Build
Latest Commitments of Traders (COT) data through September 28 showed US dollar net-longs surged sharply, while futures positioning in EUR/USD and GBP/USD turned increasingly bearish. Speculative traders have built substantial short positions in both major euro and sterling pairs, reinforcing the structural dollar-friendly backdrop.
Q4 EUR/USD Outlook: Competing Policy Paths at Inflection Point
Stonex analysts flagged EUR/USD as entering Q4 at a "pivotal inflection point" with competing Fed and ECB tightening paths colliding against major technical support levels. The euro faces persistent inflation risks and rate-differential headwinds despite the ECB's own tightening bias.
Local view
German-language coverage (XTB, finanzen.net): XTB reported that EUR/USD has fallen to its lowest level since May 2025 ("auf dem tiefsten Stand seit Mai 2025") driven by France's budget crisis ("Haushaltskrise"). German trading analysis flags the pair's technical breakdown and warns of further downside risk given fiscal uncertainty in the eurozone's second-largest economy.
French-language coverage (Boursorama, Journal du Coin): Boursorama highlighted the broader geopolitical context of dollar strength, noting competition between reserve currencies amid rising financing costs (taux de financement at two-decade highs). Journal du Coin stated bluntly: "L'euro tombe au plus bas depuis 17 mois" (The euro falls to its lowest in 17 months) with France's debt crisis contaminating the entire eurozone.
Japanese-language coverage (Investing.com, Minkabu): Japanese FX outlets reported euro weakness against the dollar and flagged yen volatility concerns. Minkabu noted eurozone investor sentiment (ZEW sentiment at +2.7, down from +5.1) and highlighted inflation risks from Bundesbank chief Nagel, who warned inflation risks remain "upward-tilted."
Context & numbers
- DXY level: Dollar Index revisited April 2025 highs (near 100.5–101.0 range based on prior week's 17-month peak language)
- EUR/USD: 1.1161 (lowest since May 2025, down from ~1.1476 three days prior)
- GBP/USD: Below 1.3250, struggling for recovery
- US payrolls (October 4): Weaker than expected, but failed to break dollar momentum
- ZEW eurozone sentiment (October 5): +2.7 (down sharply from +5.1 prior)
- Positioning: Dollar net-longs surged; EUR/USD and GBP/USD shorts built (per latest COT through Sept 28)
- Treasury yields: Elevated, supporting USD despite softer employment data
On the radar
- FOMC Minutes (this week): Markets will parse minutes from the latest Fed decision for clues on rate-hike timing and balance-sheet policy, particularly in light of softer payroll data.
- ECB rhetoric: Central European inflation hawks (notably Bundesbank's Nagel) continue to signal upside price risks, though French fiscal turbulence complicates any hawkish messaging for the euro.
- BoE speaker calendar: Bank of England commentary will be closely watched to assess whether sterling can stabilize above 1.3250 amid diverging monetary paths.
- French budget negotiations: Ongoing political uncertainty around France's 2027 budget could trigger fresh volatility in EUR/USD; watch for government statements and legislative votes.
Reporting as of 2026-10-05, 17:00 UTC. Data current through October 4 US market close.
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