Insights 
VT 
The Euro has increased by 0.1% against the US Dollar, showing moderate performance among G10 currencies. The focus on political stability in France contributes to this change, with PM Lecornu successfully navigating a no-confidence vote.
Market Sentiment And Stability
France/Germany yield spreads remain stable, reflecting this political situation. Market sentiment is key, with the Euro closely linked to risk reversals. The European Central Bank’s neutral stance on interest rates also supports this stability as the market does not expect changes this year.
The Euro’s Relative Strength Index has stabilised at neutral levels, around 50. Currently, the currency is testing the descending trend line from previous lows. Without breaking the 50-day moving average at 1.1691, experts predict the Euro will stay in the 1.1600 to 1.1700 range.
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We are seeing the Euro quietly holding its ground against the dollar, trading in the mid-1.16s as of October 16, 2025. This stability is largely thanks to a calmer political situation in France, which has helped the spread between French and German 10-year government bonds narrow to a stable 48 basis points. That’s a significant improvement from the wider, more volatile spreads we saw during the political turbulence back in 2024.
Volatility And Trading Strategies
This lack of major movement has pushed expected volatility down, with one-month implied volatility for EUR/USD now sitting around 5.8%, below the yearly average. The European Central Bank is reinforcing this calm by signaling it will keep interest rates on hold through the end of the year, especially as recent Eurostat data shows headline inflation has settled near the 2.1% target. This removes a major catalyst for sharp moves in the currency pair for the rest of the quarter.
For derivative traders, this low-volatility, range-bound environment between 1.1600 and 1.1700 makes selling options premium an attractive strategy. With the pair expected to stay within this channel, strategies like short straddles or strangles could be considered to collect income from the market’s inaction. The slight premium being paid for upside protection also presents an opportunity to sell call spreads with a strike price near the 1.1750 resistance level.
However, we must watch the 50-day moving average at 1.1691 very closely as a key trigger point. A sustained break above this level would signal the end of the current consolidation and could open the door for a quicker move towards 1.1750. If we see a firm daily close above that moving average, it would be a signal to shift from selling volatility to buying directional call options to capture potential upside momentum.
