Insights 
VT 
The Euro is under pressure, nearing a one-month low against the US Dollar, amid political unrest in France. The EUR/USD is trading around 1.1672, slightly recovering from earlier losses.
French Prime Minister Sébastien Lecornu resigned shortly after taking office, exacerbating the country’s political crisis. President Macron has requested Lecornu to remain until Wednesday to finalise negotiations with political parties. The resignation underscores Macron’s dwindling political support as calls for early elections grow.
Us Dollar Trends
The US Dollar is benefiting from the chaos in France as the currency attracts those seeking safer assets. The US Dollar Index is around 98.40, marking an increase of nearly 0.30% for its highest level since September 25. This reflects caution in global markets, despite the ongoing US government shutdown disrupting economic data releases.
Traders are cautious about the Greenback’s outlook given the potential for further Fed interest rate cuts. The market anticipates insights from upcoming Fed speeches regarding monetary policy, with policymakers stressing the importance of balancing inflation concerns with policy decisions.
The Euro’s weakness against the Dollar is driven by persistent political risks in France, a situation that came to a head when Prime Minister Lecornu resigned. That uncertainty continues to weigh on the single currency, which has since struggled to mount a meaningful recovery. We see this reflected in the EUR/USD exchange rate, which is currently trading near 1.1550 as markets remain wary of potential instability within the French government.
For derivative traders, this suggests that implied volatility in EUR/USD is likely to remain elevated in the coming weeks. We can look back at how currency volatility spiked during similar political flare-ups in 2024, indicating that buying options to hedge or speculate on sharp moves could be a prudent strategy. This environment makes strategies that profit from significant price swings, regardless of direction, particularly relevant.
Federal Reserve Outlook
The Dollar continues to benefit from these safe-haven flows, but its path forward is not without challenges. We remember the prolonged United States government shutdown back then, which temporarily clouded economic data and briefly weakened the greenback before a budget deal was reached. This serves as a reminder that US domestic issues can quickly cap the Dollar’s strength, even when it is favored globally.
The Federal Reserve’s stance remains a critical factor, just as it was when we were watching for rate cuts in late 2025. While the Fed did deliver a single quarter-point cut in that period, recent inflation data for September 2025 came in at a sticky 3.1%, well above the 2% target. This suggests the Fed will be hesitant to ease policy further, providing a floor for the Dollar for now.
Given the persistent political risk in Europe and a data-dependent Fed, we believe put options on the EUR/USD offer a compelling risk-reward profile. These instruments would profit from further Euro weakness while limiting downside risk if sentiment unexpectedly improves. Traders should look at contracts expiring in the next 30 to 60 days to capture any immediate fallout from political headlines or upcoming US inflation reports.
