EUR: Less bearish news out of France – ING

News emerged last night from former French Prime Minister Sébastien Lecornu that President Macron could announce a new PM by Friday evening. This has come as a surprise to a market that had felt that the next chapter in the French political saga could only be new and divisive elections. The Polymarket betting site now shows a 37% probability of elections being called by the end of October, versus a 70% probability this time yesterday, ING's FX analyst Chris Turner notes.

EUR may face another sharpish fall to the 1.1500 area

"The news has helped EUR/USD to find some support near 1.1600 and the popular hedge, EUR/CHF, to bounce off 0.9300. And after spiking to the high-80s on Monday, the French: German OAT:Bund spread is drifting back to the low-80s. This news may be enough to buy the euro a reprieve until Friday evening at least."

"Today, we'll see the minutes of the ECB policy meeting from last month. The message is expected to remain that the policy rate is 'in a good place' but that the ECB will not hesitate to act should risks develop. Those risks seem to err towards slower activity, lower inflation and another rate cut – although market pricing of that outcome remains very muted."

"We prefer the lower end of a two-month trading range holding at 1.1580/1600 for EUR/USD. If not, we could see another sharpish fall to the 1.1500 area."