EUR/USD Forecast: Currency Pair of the Week (October 10, 2025)
By Fiona Cincotta, originally published at City Index
The EUR/USD currency pair remains a central focus in forex markets, especially as traders evaluate key economic indicators from both the Eurozone and the United States. As of early October 2025, this pair continues to respond to a dynamic blend of macroeconomic data, central bank commentary, and geopolitical developments. In this extended forecast analysis, we explore the technical and fundamental factors influencing EUR/USD movements, aiming to provide traders and investors with a detailed outlook for the week beginning October 10, 2025.
Overview: Euro Weakness Versus Dollar Resilience
The EUR/USD pair has experienced significant volatility through the third quarter of 2025, with momentum largely favoring the US dollar. The euro has come under pressure amid signs of economic stagnation across major European economies, while the US dollar has been underpinned by sturdy labor market data and continued hawkish messaging from the Federal Reserve. Last week’s mixed US Non-Farm Payroll (NFP) report slowed the dollar’s bullish momentum temporarily. However, the overall trend remains tilted in favor of dollar strength versus the euro.
Key Market Drivers Impacting EUR/USD
Economic and monetary policy divergence between the European Central Bank (ECB) and the US Federal Reserve is a major theme driving the EUR/USD exchange rate. Other contributing factors include:
1. Diverging Central Bank Policies:
– The Federal Reserve continues to communicate a data-dependent but restrictive stance. With inflation still above the 2% target and labor markets remaining relatively tight, Fed policymakers have suggested that interest rates will remain elevated for an extended period.
– Conversely, the ECB appears increasingly cautious. Although it has hiked interest rates in 2025, recent data on growth and inflation casts doubt on further tightening. Market participants are now wondering whether the ECB has reached the peak of its rate hiking cycle.
2. US Dollar Demand:
– General risk sentiment continues to favor the dollar, especially during periods of market uncertainty or geopolitical tension.
– US Treasury yields have climbed in recent weeks, further elevating demand for the greenback and putting downward pressure on EUR/USD.
3. Weak Eurozone Data:
– PMI figures from Germany and France, key Eurozone economies, show signs of contraction in both manufacturing and services activity.
– Inflation in the Eurozone, while still above target, has begun to soften. This reduces pressure on the ECB to remain hawkish.
– Consumer spending and business sentiment remain muted in the bloc, particularly amid lingering high energy prices and tightening credit conditions.
4. Technical Levels:
– Traders are closely watching key support and resistance levels in the EUR/USD pair.
– After failing to recover above the 1.07 handle convincingly in late September and early October, the pair has shown signs of weakness moving into the second week of the month.
Recent Economic Developments
To understand the current positioning of EUR/USD, it’s critical to analyze recent macroeconomic reports from both the Eurozone and the US:
Eurozone Highlights:
– Germany’s Manufacturing PMI held below 45.0, suggesting sustained contraction. With Germany being the bloc’s largest economy, this signals broader regional weakness.
– Eurozone Core CPI figures recently came in softer than anticipated, heightening speculation that the ECB will pause rather than hike interest rates further.
– Retail sales in the Eurozone fell by 0.4% in the latest reading, underscoring weakening domestic demand.
United States Highlights:
– The October NFP report showed an increase of 170,000 jobs versus expectations of 160,000. While below previous months, this level is still consistent with solid labor market conditions.
– ISM services PMI came in at 53.7, down from the prior month but still in growth territory, reflecting ongoing expansion in the US services sector.
– Headline and core CPI inflation in the US remain sticky
Read more on EUR/USD trading.