EUR/USD price climbs above 1.0500 amid French political turmoil
Euro rebounds against dollar amid French political uncertainty and Fed rate cut speculations
The EUR/USD pair rebounded on Tuesday, climbing 0.42% to trade at 1.0520 during the European session, after dipping 1% on Monday.
Monday’s decline pushed the pair below the 1.0500 psychological level, driven by heightened political uncertainty in France. However, signs of easing U.S. monetary policy expectations have given the euro some breathing room, setting the stage for a potentially volatile week.
EUR/USD price dynamics (September-November 2024). Source: TradingView.
Monday's sell-off stemmed from tensions over French Prime Minister Michel Barnier’s controversial use of a decree to push through his social budget reforms, bypassing parliament. Opposition parties swiftly called for a no-confidence vote, expected as early as Wednesday, adding pressure to French sovereign debt markets. Analysts from ING highlighted the widening French-German bond spread as a key factor to watch, as it could further strain the Euro if political risks escalate.
Fed reserve policy and indicators offer mixed outlook for EUR/USD
On the U.S. side, Federal Reserve Governor Christopher Waller hinted at a possible December rate cut, narrowing the US-Eurozone rate differential. This dovish shift in Fed policy has increased expectations for a weaker US dollar. Traders now await the US JOLTS Job Openings report due later in the day, which could influence EUR/USD momentum.
From a technical perspective, the pair's recovery above 1.0500 is supported by an RSI reading above 50, indicating bullish momentum. However, the 100-hour EMA at 1.0520 currently caps further upside. Looking ahead, EUR/USD may face limited upside, potentially stalling at 1.0550, unless the US data or geopolitical developments offer stronger catalysts. Traders should also monitor French sovereign CDS spreads and bond yields closely, as any worsening in risk sentiment could weigh on the euro.
EUR/USD price faces ongoing pressure as it begins December on a bearish note. Market participants have priced in a 25 basis points rate cut from the ECB in December, keeping pressure on the euro.
