The U.S. dollar remained on track for another strong week against the euro as elevated Treasury yields continued to support the greenback, even after weaker-than-expected U.S. employment data reduced expectations for another immediate Federal Reserve interest-rate increase.
The euro recovered slightly on Friday but remained under pressure after several weeks of dollar strength, keeping the U.S. currency firmly in focus across global foreign-exchange markets.
Dollar Heads for Another Weekly Gain Against the Euro
The U.S. dollar was on track for its fourth consecutive weekly gain against the euro on Friday.
EUR/USD traded around $1.1258 during the session, while the U.S. Dollar Index, which measures the greenback against a basket of major currencies, stood near 101.88.
Although the dollar eased modestly following the latest U.S. employment report, elevated Treasury yields continued to provide support.
U.S. Treasury Yields Remain Elevated
Bond yields have become one of the most important forces influencing currency markets.
The benchmark 10-year U.S. Treasury yield initially declined following the September employment report before reversing higher to around 5.285%.
Higher Treasury yields can increase the relative appeal of dollar-denominated assets, helping support demand for the U.S. currency.
Earlier in the week, the 10-year Treasury yield had reached its highest level since 2002 as global government bond markets experienced significant selling pressure.
Weak U.S. Jobs Report Limits Dollar Gains
The latest U.S. employment report provided some resistance to the dollar’s recent rally.
Nonfarm payrolls increased by only 29,000 in September, significantly below the 90,000 increase expected by economists surveyed by Reuters.
The unemployment rate also increased to 4.2% from 4.1% in August, while previous payroll estimates were revised lower.
The softer labor-market figures reduced expectations that the Federal Reserve would raise interest rates again at its October meeting.
Federal Reserve Expectations Shift
The Federal Reserve raised its target interest-rate range by 25 basis points in September to 3.75%–4.00%.
However, the weaker September employment report has encouraged traders to reassess the likelihood of another near-term increase.
Markets were pricing a high probability that the Federal Reserve would leave rates unchanged at its October meeting following the jobs report.
Investors will therefore continue monitoring upcoming inflation, employment and economic data for additional clues about the direction of U.S. monetary policy.
Why the Euro Remains Under Pressure
The euro has faced several headwinds beyond U.S. interest rates.
Higher energy prices, concerns surrounding government finances in parts of Europe and volatility in European bond markets have weighed on sentiment toward the single currency.
The euro was heading toward its fourth consecutive weekly decline against the dollar, its longest such losing streak since May 2025.
What Forex Traders Are Watching Next
Currency traders are likely to remain focused on the relationship between Treasury yields and expectations for Federal Reserve policy.
If U.S. yields remain elevated, the dollar could continue receiving support. However, additional signs of weakness in the U.S. economy could further reduce expectations for interest-rate increases and create renewed volatility in the currency market.
For EUR/USD, developments in European bond markets, energy prices and the broader economic outlook will also remain important drivers.
Final Thoughts
The U.S. dollar remains supported by elevated Treasury yields despite signs of cooling in the American labor market.
With the euro heading toward another weekly loss against the greenback, investors are now watching incoming economic data and Federal Reserve signals to determine whether the dollar’s recent strength can continue.
