Select Language

EURUSD slumps as French political turmoil weighs on Euro

Breaking news

EURUSD slumps as French political turmoil weighs on Euro

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2025.10.08 07:12
EURUSD slumps as French political turmoil weighs on Euro

update 2025.10.08 07:12

  • Euro weakens after French PM's resignation fuels fiscal instability fears.
  • US Dollar rebounds as investors eye shutdown uncertainty and higher inflation expectations from NY Fed survey.
  • Fed's Kashkari warns of stagflation risks, while Miran highlights weaker growth and urges a forward-looking policy stance.

EUR/USD falls on Tuesday amid the political turmoil in France along with the US government shutdown. The Dollar which previously depreciated is posting a surprising recovery up 0.52% in the day, according to the US Dollar Index (DXY). The pair trades at 1.1654, down 0.46%.

Shared currency retreats below 1.17 as France's budget crisis, renewed Fed hawkishness

The situation in France has kept the Euro from clearing key resistance levels and aim towards the yearly peak of 1.1918. The resignation of France's Prime Minister Lecom puts the country's 2026 fiscal budge tin danger, as difficulties amongst politics prevented France from stabilizing its public finances.

If there is no budget, the French assembly could pass a special law that allows the government to rollover spending from 2025, avoiding a shutdown like the one in the United States. Nevertheless, the law is "transitory" as the assembly needs to approve a budget.

In the meantime, the US economic docket features the NY Fed Survey of Consumer Expectations (SCE), which showed that consumers expect higher prices for a one-year period. Recently, the RealClearMarkets/TIPP Economic Optimism Index dipped in October

Fed's Kashkari flags stagflation risks, Miran urges forward-looking policy

Minneapolis Fed President Neel Kashkari was moderately hawkish as he said it is too early to determine whether tariffs will make inflation sticky. He added that recent data show signs of stagflation, though he remains optimistic about the labor market.

Fed Governor Stephen Miran noted that economic growth in the first half of the year was weaker than expected and stressed that monetary policy should remain forward-looking, given the lagged effects of prior tightening.

Data in the Eurozone featured Germany's Factory Orders, which despite improving, contractd in August, revealed the Deustche Bundesbank.

Daily digest market movers: Broad US Dollar strength weighs on the Euro

  • Minneapolis Fed President Kashkari also cautioned that he's unconvinced a few rate cuts would significantly lower mortgage rates, warning that if they did, the economy could face a burst of high inflation.
  • The New York Fed SCE showed that the median inflation expectations for one year increased from 3.2% to 3.4% and for a five-year period from 2.9% to 3%. For a three-year horizon, it remained steady at 3%.
  • The same survey revealed that earnings growth expectations fell by 0.1% to 2.4%.
  • The RCB/TIPP Economic Optimism Index slipped from 48.7 in September to 48.3, a modest 0.4-point (0.8%) decline. This marks the second consecutive month the index has remained below the neutral 50 benchmark, signaling continued pessimism.
  • Money markets indicate that the Fed will cut interest rates by 25 basis points (bps) at the upcoming October 29 meeting. The odds stand at 94%, according to the Prime Market Terminal interest rate probability tool.
  • European Central Bank President Christine Lagarde said that she hopes France will produce a budget in time. She added that the Euro should play a greater global role. She argued that the Euro Area acts as an "innocent bystander," exposed to economic and financial shocks originating from Washington.
  • German Factory Orders in August plunged to -0.8% MoM, better than July's -2.7% contraction but missed estimates for a 0.2% expansion. On a yearly basis, orders rose from -3.3% to 1.5% YoY for the same period.

Technical outlook: EUR/USD tumbles below 1.1700

EUR/USD ended Tuesday's session below the 1.1700 figure, which has opened the door for further downside. The Relative Strength Index (RSI) shows that sellers are in charge, as it turned bearish.

Therefore, the EUR/USD first support would be the 100-day Simple Moving Average (SMA) at 1.1628. If surpassed, the next demand zone would be 1.1600, ahead of extending losses towards 1.1574, the August 27 swing low. Below this, the August 1 cycle low at 1.1391 would be up next.

Conversely, the EUR/USD first resistance would be 1.1700. The next key resistance areas would be 1.1760, 1.1800 and the July 1 high of 1.1830.

EUR/USD daily chart

Euro FAQs

The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB's primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates - or the expectation of higher rates - will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB's 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone's economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.


Date

Created

 : 2025.10.08

Update

Last updated

 : 2025.10.08

Related articles


Show more

FXStreet

Financial media

arrow
FXStreet

FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.

Was this article helpful?

We hope you find this article useful. Any comments or suggestions will be greatly appreciated.  
We are also looking for writers with extensive experience in forex and crypto to join us.

please contact us at [email protected].

Thank you for your feedback.
Thank you for your feedback.

Most viewed

USD/CAD extends losses as weak US Consumer Confidence weighs, BoC and Fed eyed

The Canadian Dollar (CAD) strengthens against the US Dollar (USD) on Tuesday as the Greenback weakens following the latest US Consumer Confidence report. At the time of writing, USD/CAD is trading around 1.3944, extending losses for the second consecutive day and down roughly 0.30%.
New
update2025.10.29 00:32

USD/CHF declines for fourth day as Swiss Franc gains, Fed rate cut expected

USD/CHF trades lower on Tuesday, around 0.7930 at the time of writing, down 0.27% for the day. The pair extends its four-day losing streak as the Swiss Franc (CHF) strengthens amid fading expectations of further monetary easing by the Swiss National Bank (SNB).
New
update2025.10.29 00:13

GBP/USD sinks below 1.33 as UK fiscal woes deepen ahead of budget

The GBP/USD dives more than 0.50% on Tuesday as market participants digested news of the UK's Office for Budget Responsibility (OBR), which plan to cut productivity, leading to a huge hole in the public finances. The pair tumbled below 1.3300 for the first time since mid-October.
New
update2025.10.29 00:07

GBP underperforms versus USD - Scotiabank

Pound Sterling (GBP) is a moderate underperformer on the session so far, falling 0.1% against the US Dollar (USD) at writing after giving up early gains through the upper 1.33s in Asian trade.
New
update2025.10.28 23:24

EUR grinds cautiously higher for fifth day - Scotiabank

The Euro (EUR) is grinding slowly but surely higher, with the support of short-term spreads which are maintaining the recent compression in EZ/US short-term yields, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.
New
update2025.10.28 23:23

CAD is little changed on the day - Scotiabank

Spot is little changed.
New
update2025.10.28 23:21

USD mixed to marginally lower - Scotiabank

The US Dollar (USD) is mixed but tracking a little lower overall as the Dollar Index (DXY) continues to drift back from the 99 zone where the index appears to have peaked after its latest run higher, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.
New
update2025.10.28 23:19

GBP/JPY slips to one-week low as Yen firms on intervention risk and trade optimism

The British Pound (GBP) fell sharply against the Japanese Yen (JPY) on Tuesday as the Yen strengthened across major peers, recovering from recent weakness tied to Japan's political and fiscal developments.
New
update2025.10.28 23:09

EUR/JPY weakens as Yen rises on US-Japan deal, ECB and BoJ meetings eyed

EUR/JPY weakens on Tuesday, falling 0.50% for the day to around 177.10 at the time of writing, after hitting a multi-year high at 178.23 the previous day, and halting a five-day winning streak.
New
update2025.10.28 22:59

EUR/GBP hits multi-year highs past 0.8760 amid generalised Pound weakness

The Euro accelerated its rally against a weaker British Pound on Tuesday to reach its highest level in two years, and is about to break the November 2023 high at 0.8765 at the time of writing.
New
update2025.10.28 21:45

Disclaimer:arw

All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.

The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.

  • Facebook
  • Twitter
  • LINE

Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy

I agree
share
Share
Cancel