The euro is on track for a fifth consecutive weekly drop, but market analysts say the pace of the decline is slowing. After hitting a 17‑month low of $1.1161 on Monday amid concerns over France’s record‑high debt load and a tough political path to budget cuts, the common currency has recovered to about $1.1211. That represents a 0.3% decline for the week and a cumulative drop of more than 3% over the past five weeks against the U.S. dollar.
French debt market shows signs of steadiness
France’s sovereign‑bond market, which had been under heavy sell‑off pressure, appears to be stabilizing. The market’s recent calm has been welcomed by investors who feared a broader contagion effect on the eurozone. Analysts note that the French far‑right presidential candidate Marine Le Pen presented a budget‑deficit reduction plan this week, which markets interpreted as a reassuring signal. By contrast, hard‑left rival Jean‑Luc Mélenchon has called on the European Central Bank to cancel government debts, a stance that continues to raise eyebrows among fiscal conservatives.
U.S. yields retreat, easing dollar strength
U.S. Treasury yields posted their biggest weekly decline in about three months, pulling back some of the dollar’s recent rally. The softer yields have reduced the dollar’s upward pressure on the euro, allowing the currency to regain a few cents after its earlier plunge. Vishnu Varathan, head of Asia‑Pacific macro strategy at Mizuho Securities in Singapore, described the dollar’s position as “precarious,” noting it was being “flattered by a dismal euro and yen.”
Analyst perspective on the euro’s trajectory
Matt Simpson, senior analyst at StoneX in Brisbane, cautioned that the euro’s moves have been “pretty stretched.” He added, “You probably only get two or three big moves a year on the euro and this has been one of them… but bearish momentum is waning and I’d tread really carefully at these lows.” The consensus among market strategists is that while the euro remains vulnerable, the immediate selling pressure is losing steam.
Related currency movements
The euro/sterling cross is also down 0.3% for the week, trading near a 16‑month low of 84.74 pence. The euro/Swiss franc pair steadied around 0.9324 francs per euro after posting its biggest weekly fall in 17 months last week. Meanwhile, the Japanese yen slipped for a fourth straight week, though its recent moves have been modest, hovering near 158 yen per dollar.
Domestic unrest in France adds a layer of risk
French students staged blockades of high schools and marched through cities on Thursday, protesting education conditions. Macquarie strategists Thierry Wizman and Gareth Berry warned that the bond sell‑off and social unrest could create a feedback loop, potentially widening bond‑yield spreads if street protests intensify.
Implications for investors and policymakers
For investors, the easing of euro‑selling pressure suggests a short‑term window to reassess exposure to European assets. Policymakers in the eurozone will be watching French fiscal developments closely, as any shift toward stricter budget discipline could bolster confidence in the currency. Conversely, continued social unrest or a resurgence of French debt‑sell‑offs could reignite bearish sentiment.
Overall, while the euro’s decline remains a concern for traders, the recent moderation in French bond markets and the retreat of U.S. yields provide a modest cushion that may prevent a sharper slide in the coming days.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
