Euro: French debt risk weighs on EUR against US Dollar – ING

Chris Turner at ING highlights that EUR/USD remains fragile as French sovereign debt volatility drives the pair. A report suggesting the French Treasury may shorten issuance duration unsettled investors, who fear reduced pressure on politicians to deliver fiscal consolidation. ING continues to favor a dip in EUR/USD towards the 1.1100/1.1120 area, where stronger technical support may emerge, with French fiscal debates only starting mid-October.

French OAT stress drags EUR/USD

"Having enjoyed a modest rebound earlier in the week, French sovereign debt was hit by a report yesterday that the French Treasury could shorten the duration of its issuance to protect the long end."

"While that seems rational, investors did not like the fact that this could alleviate pressure on politicians to act."

"We are hence left with Marine Le Pen's questionable plans for fiscal consolidation next year and the current government's proposal for some modest fiscal consolidation. The debate on the latter may only get started on 13 October, suggesting little stability for French bonds at this stage."

"EUR/USD is very much being dragged around by the performance of those French sovereign bonds, OATs, and we continue to favour a dip to the 1.1100/1120 area, where more support may be found."

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