The U.S. dollar was on track for a fourth consecutive weekly gain against the euro as elevated Treasury yields, shifting Federal Reserve expectations and growing concerns about Europe’s fiscal outlook continued to shape currency markets.
The greenback remained supported even after weaker-than-expected U.S. employment data reduced some expectations for another immediate Federal Reserve rate increase.
Dollar Extends Winning Streak Against the Euro
The euro was heading toward its fourth consecutive weekly decline against the dollar, marking its longest weekly losing streak against the U.S. currency since May 2025.
Meanwhile, the U.S. Dollar Index, which tracks the greenback against a basket of major currencies, was around 101.88 and remained on course for a third consecutive weekly advance.
The recent strength in the dollar has been supported by elevated U.S. government bond yields and a major reassessment of the Federal Reserve’s interest-rate outlook.
U.S. Treasury Yields Keep Supporting the Dollar
U.S. Treasury yields remain an important driver for foreign-exchange markets. The benchmark 10-year Treasury yield moved back toward 5.285% after initially declining following the latest U.S. employment report.
Higher Treasury yields can increase the relative attractiveness of dollar-denominated assets, potentially creating additional demand for the U.S. currency.
However, the outlook remains sensitive to incoming economic data and changing expectations surrounding Federal Reserve policy.
Weak Jobs Report Complicates the Fed Outlook
The latest U.S. employment report showed that job growth slowed more than economists had expected in September.
Nonfarm payrolls increased by only 29,000 while the unemployment rate edged higher to 4.2%.
The softer labor-market data prompted investors to reduce expectations that the Federal Reserve will deliver another interest-rate increase at its October meeting.
That change in expectations briefly pushed Treasury yields and the dollar lower, although both remained supported by broader concerns about inflation and global bond markets.
Why Is the Euro Under Pressure?
The dollar’s strength is only one side of the EUR/USD story.
European government bond markets have faced renewed selling pressure as investors monitor fiscal and political risks across the region.
French and Italian government bonds have been particularly affected. The premium investors demand to hold French 10-year bonds rather than German government debt moved above 150 basis points, reflecting increased concern about France’s fiscal and political outlook.
Higher energy prices are creating another challenge for Europe because the region remains a major energy importer.
Energy Prices Add Another Risk for EUR/USD
Elevated oil and fuel prices have increased inflation concerns and added pressure on currencies belonging to major energy-importing economies.
For the euro, higher energy costs can create a difficult combination of inflation pressure and weaker economic activity.
That uncertainty could keep EUR/USD sensitive to developments in global energy markets in addition to monetary policy expectations.
What Could Move the Dollar and Euro Next?
Currency traders will continue watching U.S. inflation and employment data for clues about the Federal Reserve’s next move.
The Fed raised its target interest-rate range to 3.75%–4.00% in September, but recent comments from policymakers suggest officials may have time to evaluate additional economic data before deciding whether another increase is necessary.
European inflation, government bond yields and political developments will also remain important for the euro.
EUR/USD Outlook
The dollar currently retains support from relatively high U.S. Treasury yields, while the euro faces pressure from European fiscal concerns and elevated energy costs.
However, weaker U.S. labor-market data has complicated the outlook. If incoming economic reports continue to soften, expectations for additional Federal Reserve tightening could decline further and remove some support from the dollar.
Conversely, persistent inflation and elevated Treasury yields could keep the greenback supported.
For now, the battle between high U.S. yields and signs of a cooling labor market remains one of the most important forces driving Dollar vs Euro trading.
