DBT Bureau
Pune, 7 Oct 2026
The euro remains under pressure as rising energy costs, elevated U.S. bond yields and a stronger dollar weigh on the EUR/USD currency pair, according to Kedia Advisory’s October 2026 currency outlook. The report said EUR/USD fell to around 1.1236, marking a 17-month low, while the pair declined 2.48% in September.
The weakness reflects pressure from both sides of the currency pair. The U.S. dollar has extended its longest quarterly winning streak since 2022, while the euro has faced growing concerns over inflation, economic confidence and political risks. The dollar index gained around 2% in September and stood near 101.48.
Energy prices have added to pressure on the euro. Eurozone inflation accelerated to 3.8% in September, nearly twice the European Central Bank’s 2% target. Energy inflation rose sharply to 18.8% from 14.3% in August, while core inflation increased to 2.5%. The rise in energy costs has complicated the ECB’s policy outlook.
The ECB raised its deposit rate to 2.50% after two 25-basis-point hikes in June and September. However, the U.S. Federal Reserve also raised its policy rate, keeping the Fed-ECB rate gap at around 1.50 percentage points in favour of the dollar. Kedia Advisory said the euro needs the ECB to outpace the Fed to significantly alter the currency outlook.
U.S. Treasury yields have also strengthened the dollar’s appeal. The 10-year Treasury yield reached 5.29% on September 30, its highest level since 2007. Kedia Advisory noted that yields above 5% are attracting global capital toward dollar assets.
Political and fiscal concerns are adding further pressure. France’s debt is near 120% of GDP, while the upcoming 2027 election is contributing to uncertainty. Eurozone consumer confidence also weakened in September despite manufacturing PMI reaching 52.9.
Technically, Kedia Advisory maintains a negative bias while EUR/USD remains below 1.1300, with 1.1100 in focus. A sustained recovery above 1.1600 would change the bearish setup.
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