The euro ended the week close to where it started, trading around 1.12 against the US dollar, as traders weighed softer growth data, stress in French government bonds and a busy central bank calendar. The key release came on Friday, October 23, 2026, when the flash purchasing managers’ surveys showed that euro-zone private-sector growth lost momentum this month.
Growth slows to a four-month low
The euro-zone composite PMI fell to 51.9 in October from 53.1 in September, its weakest reading in four months and below the 52.7 that economists had expected. A reading above 50 still signals expansion, so the economy is growing, just more slowly. Both services and manufacturing came in lower than expected, and companies reported that input costs rose faster for a second month, partly because of higher energy, fuel and transport prices linked to the Middle East conflict.
France was the main drag. Its composite index dropped to 48.4 from 51.1, back in contraction territory, as political uncertainty and higher government borrowing costs weighed on activity. Germany slowed too, to 52.8 from 53.8, but stayed in expansion.
French bonds remain the pressure point
Investors have been watching France closely. The extra yield that French ten-year bonds pay over German Bunds has widened to its highest level in roughly 15 years, above 150 basis points, and the French ten-year yield has touched 5%. Late on October 23, Moody’s left France’s Aa3 rating unchanged with a negative outlook, sparing the country a downgrade that many had expected, while warning that the rating depends on adopting a deficit-reducing 2027 budget.
ECB expected to pause before a possible December move
The European Central Bank holds its next policy meeting on October 28 and 29. Its deposit rate is 2.50% after a quarter-point hike in September. With inflation running close to double the 2% target, mostly because of energy, most economists expect the bank to hold this month and raise rates to 2.75% in December. Bundesbank President Joachim Nagel has said he sees no inflation spiral yet, which leaves room to wait in October, while keeping a later move on the table.
EUR/USD stuck in a range
EUR/USD hit a 17-month low near 1.1113 on October 14 and has since recovered to around 1.12, but attempts to push higher toward the 1.126 area failed this week. Higher oil prices have supported the dollar, and the Federal Reserve also meets on October 27 and 28, so the pair now faces two policy decisions within days.
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Why it matters
Slower growth and still-high inflation put the ECB in a difficult spot, while widening French bond spreads add a political risk to the single currency. Together they make it harder for the euro to build a sustained rally against a dollar supported by high oil prices.
Market reaction
EUR/USD stayed in a narrow range around 1.12 after the weaker PMI, ending the week roughly unchanged after failing to hold gains near 1.126. Moody's decision to keep France's rating unchanged offered some relief for French bonds after the close.
MIZANOVA view
With both the Fed and the ECB meeting next week, the euro is likely to take its cue from the tone of each statement rather than the decisions themselves, which are widely expected to be holds. Any change in expectations for a December ECB hike, or new stress in French bonds, could break the current range.