The euro remained the weakest-performing G10 currency month to date as of Oct. 26, MUFG analysts said, as a modest rebound followed new 2026 lows against the pound and yen and French risks weighed.
Analysts Derek Halpenny and Lee Hardman said in an Oct. 26 research note that the euro had recovered slightly at the start of the week. MUFG linked its weak performance to investor concerns about France’s fiscal position and political risks, as well as higher energy prices and slower business growth.
France’s Economy Ministry said Oct. 23 that Moody’s maintained the country’s sovereign rating and negative outlook. The ministry’s release prints the grade as “AA3”; Agence France Trésor lists Moody’s standard notation as Aa3. The ministry said the government aimed to adopt a budget by the end of 2026 that would bring the deficit to 5%.
S&P Global’s preliminary euro-area PMI Output Index fell to 51.9 in October from 53.1 in September, indicating slower growth while remaining above the 50 mark that separates expansion from contraction. The flash reading was based on about 85% of the responses typically collected. MUFG said France’s composite PMI dropped 2.7 points to 48.4, a level consistent with contraction; S&P Global also described French business activity as having turned down again.
S&P Global linked higher energy prices with rising factory input costs and said firms were lifting their own prices. It also said inflation was adding to household living costs and holding back spending.
Halpenny and Hardman wrote: “We don’t expect Moody’s decision to leave their rating on hold to bring much relief for French bonds or the euro.” MUFG viewed the ECB meeting as a larger potential market mover than Moody’s review and said it was too early to expect ECB measures to support government bond markets. The meeting is scheduled for Oct. 28-29, with a news conference on Oct. 29.
