EUR/USD is trimming previous losses and trades near the 1.1630 area at the time of writing, up from session lows at 1.1607. Comments from Frances’ former Prime Minister Sebastien Lecornu, dismissing the possibility of new elections and assuring that there will be a budget before the end of the year, have soothed markets and eased negative pressure on the Euro.
The Common currency had come under increasing pressure earlier on the day as pressure on French President Emmanuel Macron to call a snap election mounted amid growing criticism from his own ranks. Former allies have joined the demands of opposition parties to call elections or resign, and rating agencies have warned of a further downgrade of France’s sovereign credit status if the political impasse drags on.
Across the Atlantic, the political scenario is not much better. US Senate Democratic and Republican leaders remain unable to find a way to restart funding as the shutdown enters its second week, and hopes of a breakthrough this week have fallen to 23% according to a poll by Polymarket. The lack of progress has started to erode market sentiment, boosting demand for the US Dollar and other traditional safe havens.
On Wednesday’s economic calendar, the minutes of the last Federal Reserve (Fed) meeting will be the main diversion from the political drama. During the European session, European Central Bank (ECB) policymakers, including President Christine Lagarde, will take the stage, and some Fed officials are expected to speak during the US session.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.30% | 0.10% | 0.30% | 0.03% | 0.27% | 0.67% | 0.38% | |
| EUR | -0.30% | -0.19% | 0.04% | -0.25% | -0.05% | 0.42% | 0.08% | |
| GBP | -0.10% | 0.19% | 0.25% | -0.04% | 0.18% | 0.61% | 0.29% | |
| JPY | -0.30% | -0.04% | -0.25% | -0.32% | -0.05% | 0.30% | 0.01% | |
| CAD | -0.03% | 0.25% | 0.04% | 0.32% | 0.22% | 0.64% | 0.33% | |
| AUD | -0.27% | 0.05% | -0.18% | 0.05% | -0.22% | 0.42% | 0.14% | |
| NZD | -0.67% | -0.42% | -0.61% | -0.30% | -0.64% | -0.42% | -0.30% | |
| CHF | -0.38% | -0.08% | -0.29% | -0.01% | -0.33% | -0.14% | 0.30% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Political uncertainty hurts the Euro
- The growing political uncertainty in France keeps bleeding the Euro this week, while investors’ concerns about a prolonged shutdown of the US federal government have started to hurt market sentiment and boost demand for the safe-haven USD. In the absence of key macroeconomic data to alter this view, the bearish EUR/USD trend has further room to go.
- On Wednesday, France’s recently resigned Prime Minister, Sébastien Lecornu, assured that he is going to present a solution to President Macron later today and affirmed that “the dissolution of the parliament is becoming more remote”. These comments have given some air to an ailing Euro, but the broader trend remains strongly bearish.
- On Tuesday, ECB President Christine Lagarde reiterated that the disinflationary process in the Eurozone has been completed and that she is hopeful that France will meet its international commitments and produce a budget in time.
- Eurozone data has failed to improve investors’ sentiment. German Factory Orders figures showed a 0.8% decline in August, against market expectations of a 1.4% growth, following a 2.7% contraction in July. Year-on-year, orders have increased at a 1.5% rate, after a 3.3% fall in July.
- Fed policymakers continue showing their divergences. Minneapolis Fed President Neel Kashkari has warned about a burst of inflation if the bank lowers rates too fast, while US President Donald Trump’s latest appointment, Fed Governor Stephen Miran, stated that inflation is due to population increases and reiterated that monetary policy needs to ease.
Technical Analysis: EUR/USD remains dangerously close to 1.1610 support
The EUR/USD technical picture reflects strong bearish pressure. The 4-hour chart Relative Strength Index (RSI) is low but not yet at oversold levels, and the Moving Average Convergence Divergence (MACD) remains well below the signal line, with red histogram bars increasing, suggesting that further depreciation is likely.
Bears are now testing support at the 1.1610 area, where the pair was contained the price on September 2 and 3. Further down, the target would be the August 22 and 27 lows, near 1.1575, and then the August 5 low at 1.1530, although this latter level seems out of reach for this Wednesday.
Upside attempts are likely to be challenged at the previous support area of 1.1645 (September 25 and October 6 lows), ahead of the descending trendline resistance, now around 1.1720. A break of this level would suggest a trend shift and bring last week’s highs at the 1.1765-1.1775 area into focus.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
comments
