EBC Markets Briefing | Euro down as Macron faces freefall
The dollar rose to its strongest levels in six weeks on Wednesday as risks around the US government shutdown intensified. Meanwhile, the euro dropped on France's political impasse.
Lawmakers in the lower house forced the resignation of both the previous premiers over budget plans, and were preparing to do the same to the incumbent Lecornu as soon as this week.
That means the government will struggle to meet the deadline to file a budget by 13 October, pushing the country's yield premium to the highest since early January over German 10-year debt.
Macron now faces the unenviable task of deciding what to do next with no option likely to be pleasant – choose another struggling prime minister or hold new parliamentary elections.
Deutsche Bank on Monday said that if the government collapsed, as it has now, then France would likely be "maintaining spending near the 2025 framework, with the deficit landing around 5.0–5.4 % of GDP."
France's manufacturing sector contracted in September, with output and new orders declining sharply amid rising political uncertainty. Service activity sank deeper into contraction territory.
The single currency which shows the head and shoulders pattern has dipped below 50 SMA, but the low of 1.1608 hit in early September is expected to lend support.
EBC Financial Group Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Global Financial Collaboration or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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