Euro attempts to regain the 1.1200 level following mixed Services activity data

The Euro (EUR) continued its downward trend against the US Dollar (USD) on Monday, as mixed Services Activity data and weak Investor Confidence figures led to concerns about France's fiscal health. The EUR/USD pair briefly recovered above 1.1200 after dropping to fresh 17-month lows near 1.1160 earlier in the day, following a 3% decline over the previous four weeks.

The Eurozone Services Purchasing Managers Index (PMI) data showed Eurozone services activity grew at a 53 pace in September, from 51.7 in August, while Germany's PMI was at 52.9, up from 49.7. However, Italian and French PMI figures fell short of expectations, while Spain's services activity outperformed forecasts. The Eurozone's Sentix Investor Confidence index declined to 2.7 in October from 5.1 in the prior month, while Italy's public debt-to-GDP ratio dropped to 2% in the second quarter from 4.8% in the first.

France's 10-year government bond yield reached 4.99% on Friday, surpassing the peak of 2008, reigniting concerns about a potential credit crisis that could spread to other Eurozone members. Risk aversion continued to support the US Dollar against its main peers on Monday, counteracting the negative impact of the soft labor report on Friday and dwindling expectations of an October Fed rate hike.

Analysts at DBS Group Research cautioned that higher yields driven by the Fed's tightening measures could bolster the USD, but acknowledged that elevated term premia due to debt supply, fiscal sustainability, and Treasury-market credibility concerns may not yield the same lasting support.