Forex week in review 41/2026: euro hits a 17-month low on France and Spain, Fed minutes stay hawkish

Last week the dollar rose on a global bond selloff even though US data were soft. This week the same forces kept working, but the spotlight moved firmly onto Europe. The euro opened the week by falling to its lowest level in 17 months, not because of anything the European Central Bank did, but because of politics and public finances in two of the euro area’s biggest economies. In the US, the 10-year Treasury yield touched a fresh 2002 high and the Federal Reserve’s minutes confirmed that most officials expect to raise rates again before the end of the year.

Weekly figures below compare the Friday 9 October close with the Friday 2 October close, as reported by RTTNews. Intraday levels and yields are from CNBC and Reuters reporting.

Where we left off

Going into Monday, the dollar index had gained four weeks in a row against the euro, US long-dated yields were at their highest since 2002, and the September jobs report had just shown payroll growth of only 29,000. The soft jobs data had cut the odds of an October Fed hike to about 22%, but the bond market was still the main driver. For background on the energy shock and rate hikes behind all of this, see last week’s recap.

Day by day

Monday 5 October: the euro breaks lower

The euro fell 0.6% against the dollar on Monday to its weakest level since 19 May 2025, according to CNBC citing LSEG data. RTTNews put the week’s low in EUR/USD at 1.1161, set on Monday, and the dollar index high at 102.54.

Two countries were behind it. In Spain, prime minister Pedro Sánchez called a snap general election for November amid protests over the housing crisis. Spain has been one of the euro area’s faster-growing economies, which is why the news surprised markets. In France, investors were looking at a draft 2027 budget that aims to cut the public deficit from 5.4% of GDP to 5% next year. Barclays economists said France was unlikely to hit its fiscal targets even if the plan is adopted, and ING strategists said that even if passed in full it would not stabilise the debt ratio, according to CNBC. France also holds a presidential election next year.

Tuesday 6 October: a pause

The dollar index made its weekly low of 101.75, according to RTTNews. EUR/USD bounced to its weekly high of 1.1277, and AUD/USD and GBP/USD also made their weekly highs on Tuesday. The US Treasury sold $58 billion of 3-year notes.

Wednesday 7 October: yields peak, Fed minutes land

The 10-year Treasury yield hit 5.35% in the morning, its highest level since 2002, according to CNBC. The Treasury then sold $39 billion of 10-year notes at a high yield of 5.3%, the highest auction yield since 2000. Demand was strong: indirect bidders, a group that includes foreign central banks, took 80.3% of the sale, against a recent average of 72.4%. After the auction the 10-year yield eased to around 5.29%.

That auction result matters for currency traders. A weak auction, where the Treasury has to offer a higher yield to find buyers, tends to push yields up and raise worries about the US fiscal position. A strong one does the opposite. The market took this one as a sign that buyers exist at these yields.

In the afternoon, the Fed published the minutes of its 15–16 September meeting, when it raised rates to 3.75–4.00%. The minutes said most participants assessed that another increase in the target range would likely be appropriate by year end, and that participants generally saw inflation risk as skewed to the upside. Many participants said that the longer energy prices stayed high, the greater the risk of broader price pressures. RTTNews described the minutes as hawkish. The dollar index touched about 102.46 before easing back on Thursday, according to CNBC.

USD/JPY made its weekly high of 158.51 on Wednesday. Gold hit a two-month low, according to CNBC.

Thursday 8 October: Fed speakers and a softer tone

Fed governor Christopher Waller said further hikes would likely be needed but that the Fed had flexibility on pace, leaving the door open to a pause in October, according to CNBC. St Louis Fed president Alberto Musalem said the Fed would need to hike again to bring inflation back to 2%. CME FedWatch showed roughly a 17% chance of an October hike and nearly 83% for December.

EUR/USD dipped to 1.1171 and then recovered to around 1.1205. French 10-year yields touched 4.9685% before easing. Spain faces a planned general strike on 11 November over housing, a few weeks before the snap election. CNBC also reported that ECB policymakers had dampened near-term rate-hike bets, with several arguing underlying inflation trends were more benign than the headline numbers. US initial jobless claims fell by 2,000 to 197,000, slightly below the 200,000 estimate.

Bank of England governor Andrew Bailey urged governments to repair public finances. GBP/USD made its weekly low of 1.3183 on Thursday.

Friday 9 October: gold and the euro recover a little

Treasury yields eased further from their highs and the dollar softened. Spot gold rose 1.6% to about $4,199 an ounce by mid-afternoon in New York, a one-week high, and December gold futures settled 1.3% higher on the week, according to CNBC. The dollar index still closed the week at 102.21, up 0.27%.

Pair by pair

EUR/USD: down 0.46%, a political discount

EUR/USD closed at 1.1202, down from 1.1254. The 116-pip range from 1.1161 to 1.1277 was mostly Monday’s drop and a partial recovery.

The important point is why the euro fell. Interest rate differentials between the US and the euro area did not change much this week. What changed was the risk premium on European assets. Christoph Schon of SimCorp told CNBC that the euro was facing a specifically European problem driven by political turmoil in France and Spain, rather than by rate differentials. When investors worry about a government’s ability to manage its debt, they sell its bonds, and foreign investors who sell those bonds often sell the currency too. That is a different mechanism from the usual rates story covered in central banks and interest rates, and it can override it.

Note also how the drop happened: a gap lower into the start of the week, followed by a slow grind back. Weekend political news is one of the main causes of Monday gaps in forex. If you hold positions over the weekend, your stop-loss offers no protection against a gap: the order is filled at the first available price, which may be well beyond your level. Our guide to forex market hours and sessions explains why the weekend close creates this risk.

GBP/USD: flat again

Sterling finished at 1.3235, against 1.3243. Two flat weeks in a row while the euro has fallen means EUR/GBP has been sliding. RTTNews mentioned hawkish remarks from Bank of England policymakers as support for the pound. The UK has fiscal pressures of its own, and Bailey’s comments on Thursday were a reminder of that, but this week markets were focused on France and Spain.

USD/JPY: up 0.3%

USD/JPY rose from 157.86 to 158.34, with a Monday low of 157.43 and a Wednesday high of 158.51. The pair tracked US yields almost tick for tick: up into Wednesday’s 5.35% peak in the 10-year, then a little softer as yields eased on Friday. RTTNews noted that comments from the Bank of Japan governor were seen as less hawkish than markets had hoped, which removed one source of yen support. When one central bank is talking about more hikes and another is sounding cautious, the gap between them tends to drive the pair.

AUD/USD: up 0.43%

The Australian dollar was the only major in this group to gain on the dollar, rising from 0.6955 to 0.6985. The range was narrow, 0.6931 to 0.6990. Coming a week after the RBA’s hike to 4.60%, the bounce looks like the market catching up after last week’s fall, helped by a calmer bond market in the second half of the week. It still finished below the 0.70 level that it had fallen through the previous week. Round numbers like 0.70 are psychologically important because many orders cluster around them; see support and resistance.

Gold: a two-month low, then a bounce

Gold fell to a two-month low on Wednesday as US yields peaked and the dollar firmed, then rose 1.6% on Friday to about $4,199. CNBC cited bargain buying and analysts seeing a floor building around $4,000. According to CNBC, Rhona O’Connell of StoneX said she found it hard to see gold breaking convincingly higher without a major shock, and Bybit’s Han Tan said the coming week’s CPI release could be a catalyst for gold’s next big move. Futures settled up 1.3% for the week.

Reading the Fed minutes

Minutes are published three weeks after each Fed meeting and give a fuller account of the discussion than the short statement released on the day. Traders read them for two things: how many officials hold a particular view, and how strongly.

The words matter. The Fed has a rough hierarchy of quantifiers: “all” or “almost all”, then “most”, then “many”, then “some” or “several”, then “a few” or “a couple”. When the minutes say “most participants” expect another hike by year end, that is a clear majority. When they say “many participants” worried about energy prices, it is a large group but not necessarily a majority. Learning to read that language is a small skill that helps with every set of minutes.

This set of minutes did not change the near-term picture much. The market already expected a hike by December, and pricing for an October move stayed below 20% all week. That is a good example of why a hawkish document does not always produce a big currency move: if the market has already priced the message, there is little left to react to. The guide on how to use an economic calendar explains how to read a release against what was expected.

Bond auctions: why currency traders watch them

Most retail traders never look at Treasury auctions, but in weeks like this one they can move markets. The US government funds itself by selling bills, notes and bonds at regular auctions. If demand is weak, the Treasury has to accept a higher yield, which pushes market yields higher. If demand is strong, yields can fall.

Wednesday’s 10-year auction was strong by every measure CNBC reported: indirect bidders took 80.3% compared with a 72.4% average, and dealers, who absorb whatever is left over, took only 2.5% against a 9.4% average. Peter Boockvar told CNBC that the 24-year highs in rates brought out buyers. The 10-year yield, which had touched 5.35% earlier in the day, finished the session lower, and by Friday yields were easing further. That fed into a softer dollar and a firmer gold price at the end of the week.

Risk management in a headline-driven market

This week’s biggest move happened on a Monday and was driven by political news, which is hard to plan for. Some practical points:

• Know which of your positions are exposed to weekend risk. Monday gaps are common after political events.
• Size positions so that a gap through your stop would hurt but not end your account. Our position sizing guide shows how to calculate lot size from stop distance and account risk.
• In headline-driven markets, spreads can widen and fills can slip. The guide to slippage explains why.
• Leverage multiplies everything. Under ESMA rules EU retail clients are limited to 30:1 on major pairs, and most retail CFD accounts still lose money; brokers typically disclose figures between 61% and 89%. Read why most retail CFD traders lose before increasing size after a good week.

Example: suppose a trader with a €10,000 account sells 0.5 lots of EUR/USD on Friday 2 October at 1.1254 with a stop at 1.1300, risking 46 pips, or about $230. If the pair gapped 60 pips higher on a Monday instead of lower, the stop would be filled at the gap price, and the loss would be about $300 rather than $230. That difference is the cost of weekend risk. The numbers are illustrative.

What this week teaches

• A currency can fall on politics alone. Nothing changed at the ECB this week; the euro fell because investors demanded a higher premium to hold French and other European assets.
• Weekend news creates Monday gaps, and stop-losses do not protect against gaps.
• Bond auctions are scheduled events that can move yields, and yields move currencies.
• Read Fed minutes for the quantifiers: “most” is a majority, “many” is not necessarily.
• A hawkish message that is already priced in may move the market very little.
• Safe havens do not move in a straight line. Gold made a two-month low and a one-week high in the same week.

Scheduled next week

These are the scheduled events for Monday 12 to Friday 16 October. This is a list of events, not a view on how markets will react.

• Wednesday 14 October, 8:30 am ET: US consumer price index for September, from the Bureau of Labor Statistics.
• Thursday 15 October: Australian labour force figures for September.
• Thursday 15 October, 8:30 am ET: US producer price index for September and US retail sales.
• Thursday 15 October: US weekly initial jobless claims.
• Throughout the week: speeches by Federal Reserve officials ahead of the 27–28 October FOMC meeting, and continued focus on French and Spanish politics.

Sources

• RTTNews: Dollar rises amidst inflation focus, haven demand
• CNBC: Euro hits 17-month low as political uncertainty in Spain and France rattles markets
• CNBC: 10-year Treasury yield backs off from 24-year high after solid bond auction
• CNBC: Dollar dips as European yields pull back from highs
• Federal Reserve: Minutes of the FOMC meeting, 15–16 September 2026
• CNBC: Gold hits one-week high, posts weekly gain
• US Bureau of Labor Statistics: Consumer Price Index, September 2026