The Euro (EUR) fell sharply on Monday, sliding 0.7% against the US Dollar (USD) and underperforming nearly all major peers except the Japanese Yen (JPY), according to Scotiabank Chief FX Strategists Shaun Osborne and Eric Theoret. The move reflects growing political risks in France and renewed signs of fragmentation in euro area bond markets.
French political instability weighs on Euro
“The departure of French Prime Minister Sébastien Lecornu has reignited concerns over France’s political outlook,” Scotiabank analysts said. “The development raises the risk of new parliamentary or even presidential elections—or at the very least, a new and potentially ineffective prime minister.”
They added that euro area bond markets are showing fresh signs of strain, with widening spreads suggesting rising investor unease. “The euro area government bond market is showing signs of renewed fragmentation, suggesting a potential headwind from sentiment,” the strategists noted.
ECB maintains neutral stance amid limited data
On the macro front, data releases have been sparse, with retail sales coming in line with expectations. At the policy level, European Central Bank (ECB) Chief Economist Philip Lane reiterated the bank’s neutral stance, while President Christine Lagarde is expected to echo a similar message in her scheduled remarks at 1 p.m. ET.
Technical outlook: EUR breaches key support
From a technical perspective, Scotiabank observed that the Relative Strength Index (RSI) has slipped back into bearish territory, while EUR/USD has fallen below the 50-day moving average at 1.1680. “The descending trend support drawn from the July highs appears to be holding—for now,” analysts said. They see near-term support in the mid-1.16s, with the pair likely to remain range-bound between 1.1650 and 1.1750 in the short term.
