💶Euro Set For Fifth Straight Weekly Loss: Cable FX Macro

• The EUR/USD pair is facing its fifth consecutive weekly decline, heavily influenced by a widening risk premium that continues to weigh on the Euro. While interest rate differentials between the European Central Bank (ECB) and the Federal Reserve are primary drivers, the underlying risk premium built into the exchange rate reflects broader structural and geopolitical anxieties.

• The 10-year OAT-Bund spread has widened to roughly 113 basis points as of early October 2026; this means that the premium investors demand to hold French debt over safe-haven German equivalents has surged. The French government is grappling with a projected budget deficit of 5.4% of GDP and public debt expected to hit 121.7% of GDP. France must issue €340 billion in medium- and long-term debt next year, meaning the market is increasingly pricing in execution and political risks surrounding the government's capacity to stabilize its borrowing. The market volatility has marked the worst decade for French bonds since 1803. A Wall Street Journal article noted that the French government was considering issuing shorter maturities in an effort to reduce market volatility.

• Morgan Stanley strategists said they are short euro, however, they were looking to express the basket via crosses (AUD, CHF). They added that EUR/USD downside looks extended and it was prone to a correction. Morgan Stanley thinks the euro is likely to keep falling, but there is more value in EUR/AUD and EUR/CHF.