Euro: France's Political Turmoil May Affect Trends - Gate Research Institute

2025-9-9 08:42

As the market had previously anticipated, the French Prime Minister lost in the parliamentary confidence vote yesterday and promptly submitted their resignation. A senior analyst at Gate Research Institute stated that this political event may have a certain impact on the euro.

EUR/USD may hover around the 1.1790/1800 range

"The current key issue is whether the parties with differing positions can reach a consensus on substantive issues such as the budget agreement before determining the new government leader. This is undoubtedly a negative factor for the euro. Investors are speculating whether the president will be forced to hold early elections, and French government bonds may experience a period of sluggish performance."

"Nevertheless, the euro/USD exchange rate has remained relatively robust. The recent decline in short-term interest rates in the United States has reduced the dollar hedging cost for Eurozone investors in U.S. assets to an annualized level of 2.12%, marking a new low since early April. This may particularly encourage fixed-income investors to increase their dollar hedging ratio, thereby putting pressure on the dollar spot exchange rate. However, considering the previously mentioned conditions in the U.S. money market, we are cautious about the euro/USD breaking the resistance level at 1.1830."

"Today's Eurozone economic calendar is relatively light, but the market will pay attention to the speeches of several key figures at the International Payments Innovation Summit. Given the upcoming interest rate decision meeting on Thursday, they may not make too many substantial comments on monetary policy. The EUR/USD may fluctuate within the 1.1790/1800 range in the short term. However, from a medium- to long-term perspective, 1.20 remains an important target level to watch."

Risk Warning: This article is for reference only and does not constitute any investment advice. Past performance does not indicate future trends. Investors should assess risks independently and make prudent decisions.