EUR/USD price slips as France rising unemployment and fiscal uncertainty weigh on sentiment
French economy faces slowdown amid fiscal debates, fueling EUR/USD decline
EUR/USD hit a new low for 2024, reaching below 1.0600 during Wednesday’s European session as weak economic signals from France and anticipation for US inflation data kept markets on edge. The euro’s drop comes as the Bank of France warns of stagnation in the fourth quarter, casting doubts over the region’s economic momentum.
After a brief boost from the Paris Olympics in August, the French economy faces a slowdown, with high business uncertainty linked to fiscal debates. Bank of France Governor Francois Villeroy de Galhau emphasized the resilience of French business, though he noted entrepreneurs’ growing concerns over economic and fiscal policies.
France’s fiscal struggles have compounded pressure on EUR/USD. As the French government addresses a slump in tax receipts and slower consumption, budget deficit worries have weighed heavily. Amid talks of substantial tax hikes and spending cuts, French executives have voiced concerns, reflected in the Bank of France’s October business sentiment survey. Unemployment in France also ticked up slightly to 7.4% in Q3, further straining the economic outlook. The central bank projects joblessness could rise to between 7.5% and 8% next year before eventually easing toward 7%.
US CPI data to offer clues on EUR/USD next move
In this fragile European backdrop, EUR/USD traders are focused on upcoming US Consumer Price Index (CPI) data, due at 13:30 GMT, which could shape expectations for the Federal Reserve’s next move. The CPI report is expected to show an annual inflation increase to 2.6% from 2.4% in September, with core inflation holding steady at 3.3%. Rising inflation could prompt the Fed to reconsider its approach, particularly given recent comments from Minneapolis Fed President Neel Kashkari, who suggested a surprise inflation surge could alter the current rate trajectory.
While the Fed’s December rate cut likelihood has fallen to 62% from 70% last week, today’s CPI release and scheduled Fed speeches are likely to offer new clues for EUR/USD, keeping investors alert to any signals on US economic direction.
The fourth quarter of 2024 has been challenging for the euro. EUR/USD started the week in a continued downtrend, shedding another 0.6% and hitting a fresh 30-week low.
