FX.co ★ Euro Attempts Recovery

The euro tried to recover from its weakest level in eighteen months, trading just below $1.12, as the recent rally in oil prices paused and both the US dollar and Treasury yields pulled back. Still, the single currency remains under pressure due to persistent energy-driven inflation, surprisingly resilient economic activity, and mounting concerns over France’s public finances ahead of next year’s presidential election.

France’s draft 2027 budget targets a reduction of the fiscal deficit to 5% of GDP, but uncertainty is growing over the government’s ability to secure parliamentary approval for substantial spending cuts in an increasingly fragmented and polarized legislature.

On the monetary policy front, markets are currently pricing in an additional rate hike from both the European Central Bank and the US Federal Reserve in December. Investors are now focused on Wednesday’s US CPI release and comments from ECB officials during this week’s IMF–World Bank meetings for further guidance on the future path of interest rates.