Insights 
VT 
Euro’s Market Performance
The exchange rates reveal Euro’s performance against major currencies, with Euro weakening most against the Australian Dollar. The heat map illustrates percentage changes of major currencies, with the Euro showing notable depreciation against others, including the US Dollar and Canadian Dollar.
Gold experienced a decline to around $3,930 following a previous high of $3,950. The precious metal is influenced by safe haven demand amid political and economic uncertainties.
The currency market insights from FXStreet provide detailed analysis of current economic conditions. They are for informational purposes only and do not serve as investment advice, with responsibility for investment decisions lying with the individual.
Today’s Sentix investor confidence reading for October showed a sharp improvement to -5.4, yet we see the EUR/USD falling towards 1.1650. This tells us the market is looking past the headline optimism and focusing on deeper issues within the Eurozone. The disconnect between improving future expectations and the poor current situation index is a classic warning sign.
Political uncertainty in France, with ongoing debates about their 2026 budget deficit, is clearly weighing on the common currency. Simultaneously, the US government shutdown has paradoxically strengthened the dollar as capital seeks safety, a pattern we also observed during the shutdown in the fall of 2023. This safe-haven flow into US Treasuries is overriding any negative sentiment about the shutdown itself.
Euro Outlook and Trading Strategies
We must remember that last week’s flash manufacturing PMI for the Eurozone came in at a contractionary 46.2, marking the fifteenth straight month below the 50-point threshold. While headline inflation has cooled to 2.5% year-over-year, this core industrial weakness explains why the ‘Current Situation’ component of the Sentix survey remains so deeply negative. This shows the recovery is uneven and not firmly rooted in the private sector.
The report’s reference to an economy propped up by ‘armaments’ is critical, as it points to a recovery driven by government defense spending rather than broad consumer or business health. We’ve seen this reflected in the order books of major European defense contractors, which have swelled since the escalation of the Ukraine conflict back in 2022. This type of growth is not sustainable for the wider economy.
Given this backdrop of conflicting data and high political risk, outright short positions on the Euro may face sharp reversals on any positive news. A more prudent approach for the coming weeks would be to use options to express a bearish view, such as buying EUR/USD put spreads. This allows us to define our risk while capitalizing on potential further declines toward the 1.1500 level.
The Euro’s notable weakness against the Australian Dollar is also a key trade to watch, as the chart shows a 0.70% drop today. Australia’s position as a key commodity exporter benefits from persistent demand for raw materials like iron ore, which has held above $110 per tonne. We should consider strategies that short EUR/AUD, as this cross-rate reflects both European weakness and commodity-linked strength.
The European Central Bank is likely to remain dovish in this environment, as the weak industrial data and political fragmentation make monetary tightening impossible. This contrasts with the Federal Reserve, which, despite the shutdown, is still expected to hold rates higher for longer to combat its own inflation pressures. This widening policy divergence will continue to place downward pressure on the Euro.
