The euro fell in the European market on Monday against a basket of global currencies, moving away from its highest levels in nearly two weeks against the US dollar and heading towards its first loss in the last three days, due to corrections and profit-taking.
The euro is under pressure due to renewed concerns about the political and financial situation in France, amid a wave of violent popular protests in the eurozone's second-largest economy.
Investors are awaiting further economic data from the Eurozone in the near future, as it is important in determining the direction of the central bank and its decision on interest rates during its meeting scheduled for October.
Price overview
Euro exchange rate today: The euro fell against the dollar by 0.5% to ($1.1181), compared to Friday's closing price of ($1.1239), and recorded a high level during today's trading at ($1.1235).
The euro ended Friday's trading session up 0.2% against the dollar, achieving its second consecutive daily gain and hitting a near two-week high of $1.1269, due to falling US yields.
Thanks to purchases from 17-month lows, the euro managed to achieve a weekly gain of about 0.4% last week, marking its first weekly gain since late August.
Violent protests in France
The protests in France began last September, against the backdrop of deteriorating school conditions and teacher shortages, before expanding to include demands related to the high cost of living and declining public services.
The country witnessed a sharp escalation over the weekend, when some demonstrations turned into riots, vandalism and looting in a number of cities, increasing the pressure on the French government.
In a televised address to the nation on Sunday, French President Emmanuel Macron condemned the “shocking” scenes of violence, after the country experienced some of its worst protests in years on Saturday.
These developments come amid political challenges and difficulties in controlling the country's public finances, with rising borrowing costs and renewed concerns about the government's ability to contain the deficit and public 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.
US dollar
The dollar index rose 0.25% on Monday, beginning to recover from its lowest level in two weeks, reflecting a rebound in the US currency against a basket of major and minor currencies.
This recovery is due to purchases of the US dollar as the best alternative investment, especially in light of rising concerns about political developments in France, coinciding with continued geopolitical tensions in the Middle East region.
FX News Today Vision
The euro is under short-term pressure as concerns about political and financial stability in France resurface. Continued protests and difficulty passing the budget could increase pressure on French bonds and borrowing costs, weakening the appeal of the single currency.
However, the continuation of the decline is not a foregone conclusion; its extent will depend on how the French developments are reflected in the bond markets, as well as the direction of the dollar ahead of the Federal Reserve and European Central Bank meetings.
We believe that the widening gap between French and German bond yields, and the market's reaction to political developments, will remain key factors in determining the direction of the euro in the coming days.
