EUR/USD weakens below 1.1750 amid fears of political crisis in France

• EUR/USD softens to near 1.1730 in Monday’s early European session. 

• The Fitch agency downgraded France’s credit rating on Friday. 

• The US central bank is anticipated to cut rates for the first time since December. 

The EUR/USD pair loses ground to around 1.1730 during the early European session on Monday. The Euro (EUR) weakens against the US Dollar (USD) as ratings agency Fitch downgraded France's credit rating amid political turmoil. Traders will closely monitor the European Central Bank’s (ECB) Christine Lagarde speech and the US Federal Reserve (Fed) interest rate decision later on Wednesday. 

The Fitch agency, one of the top global institutions gauging the financial solidity of sovereign borrowers, downgraded France’s credit rating on Friday from “AA-” to “A+.” This registered the country’s lowest level on record at a major credit rating agency.

The move came days after François Bayrou resigned as Prime Minister after losing a parliamentary confidence vote over an attempt to get an austerity budget adopted. Fears of political turmoil in France could undermine the shared currency in the near term. 

The downside for the major pair might be limited as a weakening US labor market reinforced expectations that the US central bank will deliver its first rate cut of the year on Wednesday. Pricing of Fed fund futures indicates that the market believes the Fed is certain to cut its key interest rate by 25 basis points (bps) on September 17, according to the CME FedWatch tool.

The University of Michigan (UoM) said on Friday its Consumer Sentiment Index for September fell to 55.4 in its preliminary estimate, from 58.2 in August. This reading came in worse than the market expectation of 58.0 and marked a second straight month in September, weighing on the Greenback.