Euro rebounds as French bond yields fall and debt concerns ease

The euro gained ground on October 6 as lower French government bond yields eased concerns over euro zone debt markets. Trading at $1.1252, the currency rose 0.28% and was heading for its largest one-day increase since September 3.

The recovery followed a slide to $1.116 on October 5, its weakest level since May 2025. The euro had lost more than 1% in the preceding week, marking a fourth consecutive weekly decline. The dollar index dropped 0.26% to 101.89, putting it on course for its largest daily decline since September 25.

France’s benchmark 10-year yield fell 8 basis points to 4.7824%. Marc Chandler, chief market strategist at Bannockburn Capital Markets, said falling oil prices had pushed yields lower in France and Italy, helping the euro recover. French debt has faced pressure as politicians seek to narrow the budget deficit before an election in 2027.

Oil prices declined as increased Middle Eastern crude exports and a G7 emergency stockpile release reduced supply worries. Yemen’s government said Saudi-backed forces had advanced on October 5 to recapture coastal territory around the Bab el-Mandeb Strait as far as Mocha.

Sterling gained 0.39% to $1.327 after reaching $1.3283, a one-week high. The yen moved in the opposite direction, with the dollar rising 0.05% to 157.98 against the Japanese currency.

Expectations for an October Federal Reserve rate increase have weakened following softer-than-expected U.S. employment data and comments by some Fed officials. CME FedWatch put the probability of an increase of at least 25 basis points at about 22%, down from about 51% a week earlier. Markets priced an 86% likelihood of a hike in December.