The euro rose in the European market on Tuesday against a basket of global currencies, resuming its gains that had paused yesterday against the US dollar, approaching its highest levels in two weeks once again, benefiting from the decline in the US currency due to the receding likelihood of the Federal Reserve raising interest rates in October.
The euro's rise comes at a time when markets are closely watching developments in the political landscape in France, amid continued security and social pressures following the imposition of a limited curfew in some cities, coinciding with the start of discussions in the French parliament regarding a number of items in the 2027 budget and voting on them.
These developments are of particular importance to investors, as they await indicators that reveal the government’s ability to contain internal tensions and move forward with its financial plans, which may reflect on market confidence in French assets and the trajectory of the European currency.
Price overview
Euro exchange rate today: The euro rose against the dollar by 0.2% to ($1.1235), compared to today’s opening price of ($1.1212), and recorded a low of ($1.1208).
The euro ended Monday's trading down 0.25% against the dollar, its first loss in the last three days, due to profit-taking and corrective activity, after hitting a near two-week high of $1.1269 on Friday.
US dollar
The dollar index fell 0.2% on Tuesday, resuming losses that had paused the previous day, and nearing its lowest level in two weeks, reflecting the decline in the US currency against a basket of major and minor currencies.
This decline is due to a slowdown in dollar purchases as the best available investment, especially with the diminishing likelihood of the Federal Reserve raising interest rates when it meets next week.
According to the CME Group’s FedWatch tool, the pricing of the probability that the Federal Reserve will keep interest rates unchanged at its October meeting is currently at 83%, while the pricing of the probability of a 25 basis point rate hike is at 17%.
French developments
French authorities continue to tighten security measures to contain the fallout from the protests and riots that have swept the country in recent days, imposing a limited curfew in parts of Paris and other cities in an attempt to curb violence and looting.
Prime Minister Sebastien Lecornu confirmed that these measures helped restore calm overnight, while local authorities retained the option to reimpose them if necessary.
On the financial front, attention is focused on the French parliament, which is scheduled to vote today on the first part of the 2027 budget bill related to revenues, following a question-and-answer session with the government, while the finance committee continues to examine and vote on the appropriations for a number of sectors within the second part of the bill.
These discussions come amid political challenges and social pressures over public spending, keeping the government's ability to pass its fiscal plan under close scrutiny from investors, given the markets' sensitivity to the trajectory of the French deficit and debt.
European interest rate
The money market's pricing of the likelihood of the European Central Bank raising European interest rates by about 25 basis points this October is stable at around 50%.
In order to reprice those possibilities, investors are awaiting the release of more economic data in the Eurozone on growth, inflation, unemployment and wage levels.
FX News Today Vision
Pressure on the euro is mounting through the French political and fiscal risk channel, not just through the protests themselves. Continued unrest could make reaching a budget agreement more difficult, while rising bond yields and a widening spread with Germany could tighten financing conditions and increase market sensitivity to French debt.
These factors alone are not enough to confirm the continuation of negative pressures on the movement of the euro; the movement of the dollar and expectations of monetary policy remain crucial factors in the direction of the EUR/USD pair.
What will be most important today is whether the budget discussions within the French parliament will provide signs of tangible legislative progress or confirm the continuation of the political divide.
