EUR/USD dives as France Prime Minister resigns unexpectedly
- The Euro plunges below 1.1700, approaching one-month lows at 1.1645.
- The resignation of France's Prime Minister sends the Euro tumbling across the board.
- President Trump has threatened with massive layoffs as talks to fund the government remain stalled.
The Euro is plunging across the board on Monday, following news that France's Prime Minister, Sébastien Lecornu, resigned. EUR/USD has sliced through the 1.1700 area and is approaching one-month lows at 1.1645 at the time of writing.
France's President's office announced that Lecornu tendered his resignation on Monday, hours after the new government was announced. Lecornu is the fifth Prime Minister in Macron's second term, and his resignation leads the country into a deep political crisis. putting the President's credibility into question.
In the US, attempts to fund the Federal Government failed in the US Senate over the weekend, sending the US government's closure into the second week. US President Donald Trump has threatened to impose mass layoffs of federal workers if the talks go nowhere and the market starts pricing in a protracted shutdown.
In the economic calendar, European Central Bank (ECB) President Christine Lagarde and Eurozone Retail Sales will draw the focus on Monday. In the US session, Kansas City Federal Reserve (Fed) President Jeffrey Schmid's conference is the only event worth mentioning.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.54% | 0.19% | 0.51% | -0.01% | -0.17% | -0.03% | 0.34% | |
| EUR | -0.54% | -0.46% | -0.12% | -0.58% | -0.75% | -0.61% | -0.24% | |
| GBP | -0.19% | 0.46% | 0.46% | -0.12% | -0.28% | -0.14% | 0.23% | |
| JPY | -0.51% | 0.12% | -0.46% | -0.47% | -0.73% | -0.61% | -0.22% | |
| CAD | 0.00% | 0.58% | 0.12% | 0.47% | -0.12% | -0.02% | 0.35% | |
| AUD | 0.17% | 0.75% | 0.28% | 0.73% | 0.12% | 0.14% | 0.54% | |
| NZD | 0.03% | 0.61% | 0.14% | 0.61% | 0.02% | -0.14% | 0.37% | |
| CHF | -0.34% | 0.24% | -0.23% | 0.22% | -0.35% | -0.54% | -0.37% |
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: The Euro plinges on France's political uncertainty
- The Euro is coming under pressure following the resignation of France's Prime Minister Lecornu. With the Eurozone's second-largest economy facing a fiscal crisis, the prospects of a snap election that might give power to populist parties are likely to punish the Euro in the coming sessions.
- The election of the pro-stimulus Sanae Takaichi as the new Prime Minister in Japan cast doubt on the Bank of Japan (BoJ) monetary tightening plans and has sent the Japanese Yen (JPY) tumbling, providing an impulse to the US Dollar on an otherwise quiet Asian trading session.
- On Friday, Fed policymakers highlighted their divergences about the monetary policy path. Thump's latest pick, Stephen Miran, considered that inflation is well-anchored and that the bank has "plenty of space to cut rates," while Dallas Fed President Lorie Logan warned that price inflation persists and that it might get worse in the near-term.
- Investors, however, remain convinced that the Fed will cut rates at the end of the month. The CME Group's Fed Watch Tool shows a 95.7% chance of a quarter-point rate cut in October, and an 84% chance of another rate cut in December. This is likely to act as a headwind for the US Dollar's recovery.
Technical Analysis: EUR/USD is at the 1.1645 support area
The EUR/USD's technical picture reveals a renewed selling pressure, with bears focusing on the late-September lows at 1.1645. The 4-hour chart Relative Strength Index (RSI) falls sharply to levels suggesting strong bearish momentum, and the Moving Average Convergence Divergence (MACD) has crossed below the signal line.
The mentioned low at 1.1645 might provide some support following a 0.6% daily sell-off. Further down, the target would be the September 2 and 3 lows, near 1.1610, and the August 22 and 27 lows, near 1.1575.
To the upside, immediate resistance is at the previous support of 1.1685 area (October 2 lows) ahead of the daily highs, at 11.1730, and last week's highs at the 1.1760-1.1770 area.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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