At the beginning of the European trading session on Thursday, the EUR/USD currency pair is consolidating around the round level of 1.1200.

Negative expectations regarding France's financial position continue to put pressure on the euro. The increase in France's borrowing costs has resulted from a global bond sell-off, which in turn is exacerbating the decline in the single European currency. Traders are concerned that financial instability in France could potentially affect other countries in the region.

"France is a major economic player. If a systemic problem arises in this country, it could affect the whole of Europe. Hopefully, it will not come to a discussion of such issues," commented Ubide, head of economic research at Citadel.

Sentiment toward the euro continues to deteriorate: political risks and movements in yield spreads are pushing EUR/USD lower.

ABN Amro analysts emphasize that changes in interest rates have become the main factor behind the euro's recent weakening: "shifts in interest-rate differentials are encouraging speculators to open short positions in the euro and long positions in the dollar." Despite positioning data confirming this trend, the bank notes that "other factors have also affected the currency."

According to ABN Amro, the euro "tends to weaken during periods of sharp increases in government bond yields in one or more major eurozone countries due to political or fiscal risks." Periods of instability create "fears of contagion," which are also reflected in the foreign exchange market. In practice, "periods of fiscal and political uncertainty in the eurozone often coincide with net short positions in the euro and a decline in EUR/USD"; the bank explains this relationship based on recent observations of the spread between French and German 10-year bond yields in relation to the euro.

The bank notes: "In our FX Weekly last week, we already pointed out that political uncertainty would put pressure on the euro toward the end of this year and the beginning of next year," and acknowledges that "this pressure has emerged earlier than we expected." However, ABN Amro believes that in the near term, "sentiment toward EUR/USD may remain negative, but we do not expect a prolonged sell-off," and therefore "we are making no changes to our forecast for the end of 2026."

On the other side of the pair, the U.S. dollar is receiving support. The minutes of the latest Federal Reserve meeting showed unanimous support among policymakers for the September interest-rate hike, with most members believing that another rate hike would be appropriate before the end of the year. The minutes stated: "Regarding future monetary policy, most participants judged that another increase in the target range for the federal funds rate may be warranted before the end of the year."

From a technical perspective, the 1.1160 level now serves as support. The oscillators are negative, indicating an advantage for the bears. However, the Relative Strength Index is in oversold territory, pointing to a possible correction or consolidation. The nearest resistance is provided by the 1.1215 level. Above it, the 1.1260–1.1285 level will act as resistance.