Euro set for weekly drop against dollar, yen as France concerns resurface

The euro was heading for a weekly loss against both the US dollar and the Japanese yen, Reuters reported on Friday, October 23, after a fresh sell-off in French government bonds drove the country's debt risk premium to levels not seen since the euro area sovereign debt crisis of 2011 on Thursday.

The single currency was also on track to fall 0.49% against the Swiss franc over the week, according to the report. The dollar index, which measures the greenback against a basket of currencies, rose 0.16% to 101.75 on Friday after touching 101.44 on Thursday, its lowest level since the beginning of the month. Despite that intraweek dip, the index was on course for a weekly rise of just 0.02%, leaving it close to where it started the week.

France's fiscal position has been a recurring theme for euro traders this month. Earlier in the week, Reuters reported that the spread between French and German 10-year government bond yields — the gauge most commonly used to measure France's risk premium — widened by 9.9 basis points on Monday to 147.3 basis points. At that stage, Chris Weston, head of research at Pepperstone in Melbourne, said French sovereign risk was clearly being priced into European equities, but added that the euro's resilience suggested traders were not yet treating it as a systemic European problem. The renewed bond sell-off later in the week brought the issue back to the front of the currency market's attention.

The dollar side of the equation was mixed. According to the Reuters report, the greenback came under pressure during the week as a technology-led sell-off on Wall Street showed the dollar was no longer attracting its usual safe-haven flows, with doubts about the sustainability of the artificial-intelligence investment boom fuelling expectations of a more dovish Federal Reserve. That left the euro's weekly decline looking more like a France-specific story than a broad dollar rally.

Bond markets reflected the same swings. The yield on the benchmark US 10-year Treasury note was up 3.5 basis points at 4.99% on Friday, after dropping 19.5 basis points the previous day as concerns about the AI outlook reignited, Reuters said.

The yen was the other side of the euro's weakness. Lee Hardman, senior currency analyst at MUFG, said in the Reuters report that the yen had "continued to trade at stronger levels at the end of this week, encouraged by more risk-off trading conditions."

The wider rate backdrop remains unusual. FXStreet noted this week that Federal Reserve officials had recently signalled there was no urgency to raise interest rates, while traders were still pricing in roughly an 80% chance that the US central bank would raise borrowing costs again at its December policy meeting. Those competing signals help explain why the dollar index has been oscillating within a narrow weekly range rather than trending.

Precious metals have been caught in the same cross-currents. Kitco reported on Thursday that gold was struggling below $4,100 an ounce, last trading around $4,076 and down about 1.5% on the day, after US weekly jobless claims fell to a three-month low and pointed to a relatively healthy labour market.

Traders are now looking ahead to a dense run of central bank meetings and macroeconomic releases. As always, currency and metals prices respond to many overlapping factors, and past moves in spreads, yields or exchange rates do not determine what happens next.

Follow EUR/USD, GBP/USD, USD/JPY and XAU/USD on Puqet: WOZILA, our forex & gold signal service, publishes trade ideas with a stated entry, stop-loss and take-profit, and explains how each one is tracked.

This is a news summary for general information only — not financial advice, and nothing here is a recommendation to buy or sell any currency or metal. Exchange rates and gold prices can move sharply around data releases and central-bank decisions, and trading them carries a real risk of loss, which leverage magnifies. Always verify against the original source and do your own research before making a financial decision.