Euro: France spreads weigh on EUR – ING

Francesco Pesole at ING sees EUR/USD downside risks persisting, with the 1.1320–1.1330 area as key support that could be tested quickly on stronger US data or another sharp Oil move higher. He notes that Eurozone economic resilience is being offset by wider French spreads and fiscal concerns, a narrative he judges unlikely to support the Euro near term.

French fiscal worries pressure euro

"We still view the 1.1320-1.1330 area as the next key support for EUR/USD. We could reach that level quite quickly if oil prices take another sharp leg higher and/or US data surprises to the upside over the next couple of weeks. For now, we do not think new lows are imminent, but downside risks persist."

"As for euro-specific drivers, economic resilience (yesterday’s Ifo index mirrored strong PMIs) is at least partly being offset as a EUR-positive factor by wider eurozone spreads. French 10-year yields are trading 110bp above bunds, and there has been little relief from reports that Marine Le Pen may back the proposed budget to avert a bond crisis."

"Risks are tilted towards further spread widening from here, and while the FX impact remains difficult to isolate, it is a narrative that is unlikely to help the euro in the current environment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)