The Euro (EUR) continues to show weakness, experiencing a notable drop of 0.7% against the US Dollar (USD) and trailing all G10 currencies, with only the Japanese Yen (JPY) faring worse. According to reports from Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret, this dip is noteworthy against a backdrop of political uncertainty in France following the departure of Prime Minister Lecornu.
The exit of Lecornu has reignited concerns about France’s political stability, prompting fears of new parliamentary or presidential elections. Analysts are suggesting that the country may soon face a potentially ineffective new Prime Minister, which could exacerbate market volatility. This atmosphere of uncertainty has contributed to a sense of fragmentation in the euro area government bond market, a trend that is likely to pose challenges for market sentiment moving forward.
In terms of economic data, recent retail sales figures met expectations, leaving little to excite investors. Meanwhile, attention is turning to the European Central Bank (ECB), where Chief Economist Philip Lane has confirmed a neutral stance. It is anticipated that ECB President Christine Lagarde will convey a similar message during her remarks later today.
Technically, the Euro has seen its Relative Strength Index (RSI) drop into bearish territory, and the currency has breached key trend support levels, specifically the 50-day moving average, which currently stands at 1.1680. While a descending trend drawn from July highs appears to be holding for now, analysts are focusing on nearby support levels in the mid-1.16 range. Expectations are for the Euro to remain within a near-term trading range between 1.1650 and 1.1750 as the markets digest these developments.
