empty
 
 
05.12.2024 12:53 AM
Euro Prepares for Turbulence

Will the French government's resignation spark upheaval in financial markets? Will Jerome Powell hint at a pause in the Federal Reserve's monetary policy easing cycle? These two questions are weighing on investors, causing EUR/USD to consolidate within a narrow trading range. The main currency pair is coiling like a spring, ready to surge even before the release of the U.S. November employment report.

French President Emmanuel Macron has urged lawmakers not to topple the government, appealing to them not to prioritize personal ambitions over the nation's interests. However, both the left and right factions in parliament claim that Prime Minister Michel Barnier and his administration are out of touch with the French public. With just moments left before a vote of no confidence, the prime minister warns that such a move could spark turmoil in financial markets. For now, the yield spread between French and German bonds is narrowing, helping EUR/USD to stabilize.

Yield Spread Dynamics Between French and German Bonds

This image is no longer relevant

Should the government be ousted, it would mark the shortest tenure for a French administration since the founding of the Fifth Republic in 1958. France would enter uncharted territory politically and economically. Investors would then grapple with the possibility of the yield spread—already at its highest since 2012—widening further. If that happens, parity in EUR/USD would draw closer.

The euro is holding its ground due to reduced expectations of a 50-basis-point deposit rate cut by the European Central Bank in December. According to Croatian National Bank Governor Boris Vujcic, monetary easing must be cautiously approached, as the road is treacherously slippery. His Finnish counterpart, Olli Rehn, also advocates leaving room for maneuvering within the ECB.

Probability of ECB's 50 b.p. Rate Cut in December

This image is no longer relevant

Pressure on the dollar comes from receding "Trump trade" momentum and a drop in the likelihood of a Fed pause in the monetary policy easing cycle in December, from 44% to 26%. Investors are skeptical about whether Donald Trump's plans can be realized. Moreover, some of his statements are controversial. Why defend the U.S. dollar with threats of tariffs against BRICS nations when the dollar's strength is already unquestioned?

This image is no longer relevant

There are risks that Jerome Powell could reverse course, as he did at the end of the first quarter. Back then, markets had priced in a dovish Fed pivot for late 2023, but accelerating inflation forced the Fed Chair to rethink. Now, CPI and PCE growth rates are rising again. Is history repeating itself?

Two inside bars have formed on the daily EUR/USD chart, signaling significant uncertainty. It may be prudent to set pending orders: buy the euro against the dollar at $1.0535 and sell at $1.0480.

Marek Petkovich,
InstaForex के विश्लेषणात्मक विशेषज्ञ
© 2007-2024
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    कॉन्टेस्ट में हिस्सा लें
  • चैन्सी डिपॉजिट
    $ 3,000 के साथ अपना खाता जमा करें और प्राप्त करें $6000 अधिक!
    में दिसंबर हम आकर्षित करते हैं $6000 चैंसी डिपॉज़िट में
    ट्रेडिंग अकाउंट में $ 3,000 जमा करके जीतने का अवसर प्राप्त करें इस शर्त को पूरा करके आप प्रतियोगिता में भाग ले सकते हैं
    कॉन्टेस्ट में हिस्सा लें
  • ट्रेड वाइज़, विन डिवाइस
    कम से कम $500 के साथ अपने खाते में टॉप अप करें, कॉन्टेस्ट के लिए साइन अप करें और मोबाइल डिवाइस जीतने का मौका पाएं।
    कॉन्टेस्ट में हिस्सा लें
  • 100% बोनस
    अपनी जमा राशि पर 100% बोनस प्राप्त करने का आपका अनूठा अवसर
    बोनस पायें
  • 55% बोनस
    अपनी प्रत्येक डिपॉजिट पर 55% बोनस के लिए आवेदन करें
    बोनस पायें
  • 30% बोनस
    हर बार खाता टॉप अप करने पर 30% बोनस प्राप्त करें
    बोनस पायें

अनुशंसित लेख

अभी बात नहीं कर सकते?
अपना प्रश्न पूछें बातचीत.
Widget callback