Euro: Fitch move caps rebound potential against US Dollar – ING

Chris Turner at ING highlights Fitch’s unscheduled shift of France’s sovereign outlook to negative, which may weigh on French bonds and the Euro (EUR). He argues this development, combined with French fiscal concerns, should limit EUR/USD upside despite softer energy prices and sees more selling interest emerging near 1.1200–1.1250, while EUR/CHF is expected to stay pressured toward recent lows.

Fitch's negative outlook weighs on Euro pairs

"Unwelcome news for French politicians late Friday came in the form of an unscheduled ratings review from Fitch. It shifted its outlook on French sovereign debt from stable to negative and promised another ratings review by the end of February."

"Reasons for the outlook shift are familiar by now, but they centre on the government's failure to improve public finances at a time of weak growth."

"Let's see whether this unscheduled move puts much pressure on the OAT-Bund spread today. We would think that the news limits the potential for EUR/USD to rebound on softer energy prices."

"We suspect there will be more EUR/USD sellers in the 1.1200/1250 area should it make it that far."

"The news should also keep EUR/CHF pressured towards Friday's lows at 0.9180/85."

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