The Euro experienced renewed pressure against both the Canadian Dollar and the US Dollar on Monday, as concerns over France’s escalating debt crisis weighed heavily on investor sentiment. The EUR/CAD pair traded around 1.5960 during European hours, inching lower after modest gains the previous day, while the EUR/USD pair hovered near 1.1200, close to its lowest level since May 2025, and remained vulnerable to further declines [1][2]. The core driver behind the Euro's weakness is mounting anxiety that France’s fiscal and political turmoil could spill over into other heavily indebted Eurozone nations, with HSBC Asset Management highlighting that the 10-year OAT–Bund spread has widened to its highest level in 15 years, reflecting heightened sovereign risk [1][2].
Geopolitical tensions in the Middle East further contributed to market volatility. Crude oil prices found support after a series of deadly attacks by Houthi militants on Riyadh’s King Khalid International Airport, including a Sunday strike that resulted in 12 deaths and over 300 injuries [1][2]. The violence prompted US President Donald Trump to consider joining Saudi Arabia in retaliatory actions against the Iran-backed Houthis in Yemen [1][2]. Additionally, a drone attack on an oil tanker near Oman underscored ongoing vulnerabilities in global oil shipping routes, supporting the commodity-linked Canadian Dollar [1].
On the US front, the Dollar maintained its bullish undertone, supported by the Federal Reserve's hawkish stance and persistent geopolitical risk premiums. While investors have scaled back expectations for a Fed rate hike in October, bets for a 25-basis-point increase in December remain, with market participants awaiting key US inflation data and a speech from Fed Chair Kevin Warsh later in the week [2]. Technical analysis indicates that EUR/USD remains in a bearish consolidation phase, trading well below the 100-period Simple Moving Average, with resistance at 1.1275 and key support at 1.1160, the year-to-date low [2].
Rabobank analysts also noted that Canada’s decision to prioritize full sovereignty over trade decisions has negatively impacted Canadian exporters, who traditionally sent about two-thirds of their products to the US market [1]. However, the current risk-off sentiment and rising oil prices have lent support to the Canadian Dollar against the Euro [1].
CONCLUSION
The Euro remains under significant pressure due to France’s debt crisis and heightened geopolitical risks, pushing it toward multi-month lows against both the Canadian and US Dollars. Market sentiment is decidedly risk-off, with investors favoring safe-haven assets and commodity-linked currencies. The outlook for the Euro remains bearish, with further direction likely to come from upcoming US inflation data and ongoing developments in the Middle East.