EUR/USD rebounds above 1.1600 as trade war escalates, Macron appoints PM

• EUR/USD snaps four-day losing streak as Trump warns of "massive tariff increases" against China, triggering US Dollar selloff.
• Macron reappoints Lecornu as PM, pledging to end political chaos and deliver France's 2026 budget.
• Euro gains are capped by weak Eurozone data and lingering investor caution amid the government shutdown in the US.

The EUR/USD pair recovers some ground on Friday, climbing above 1.1600 as the Greenback plunges, driven by an escalation of the trade war between the US and China. However, gains seem capped by the political turmoil and weaker-than-expected data in the Eurozone (EZ). The pair trades at 1.1606, up 0.37% at the time of writing.

Dollar slumps on renewed tariff threats; France's leadership reset relieved Euro's bulls

On Friday, the Euro (EUR) recovered after four days of consecutive losses, despite the ongoing political turmoil in France. Recently, the French President Emmanuel Macron reappointed S​e´bastien Lecornu as Prime Minister, after he quit the job earlier this week.

Lecornu accepted Macron's offer and posted on his X.com account that he will "do everything possible to provide France with a budget by the end of the year and to address the daily life issues of our fellow citizens." He added that "We must put an end to this political crisis that exasperates the French people and to this instability that is harmful to France's image and its interests."

The Euro advanced as a relief, underpinned by US Dollar weakness. The Greenback depreciated following Trump's threats to impose "massive increase of tariffs" on China, pointing to the recent hostile export controls on rare-earth minerals.

Data-wise, the University of Michigan (UoM) revealed that Consumer Sentiment held steady in October, despite the US government shutdown and concerns about the labor market and inflation.

Daily market movers: EUR/USD advances, despite Fed's hawkish comments

• The US Dollar Index (DXY), which tracks the performance of the buck's value against a basket of six currencies, slides 0.52% down to 98.87.
• The UoM Consumer Sentiment eased slightly to 55 from 55.1, exceeding forecasts for a deeper deterioration. The poll showed that sentiment declined amongst Democrats. Overall, consumers were pessimistic about future personal finances, and conditions for buying durable goods were unfavorable. The same survey showed that inflation expectations for one year edged lower from 4.7% to 4.6%, and for a five-year period steadied at 3.7%.
• St. Louis Fed President Alberto Musalem said the central bank's dual mandate is facing strain, with inflation still elevated while the labor market shows signs of softening. He noted that policy currently sits between "modestly restrictive and neutral," but reiterated that overall financial conditions remain accommodative.
• Money markets are fully pricing in a 25-basis-point rate cut at the Fed's October 29 meeting, with odds at 94%, according to the Prime Market Terminal probability tool.

Technical outlook: EUR/USD recovers 1.1600, poised to consolidate

EUR/USD slipped into a short-term bearish bias after breaking below the 100-day Simple Moving Average (SMA) at 1.1633 and the 1.1600 handle. The Relative Strength Index (RSI) is trending toward the neutral 50 line, signaling that selling momentum is fading.

Immediate support emerges at 1.1550, followed by 1.1500. A break below these levels would expose the August 1 cycle low near 1.1391. On the upside, resistance sits at 1.1650 and 1.1700. A sustained move above 1.1700 would open the door to 1.1800 and the July 1 high at 1.1830.