Australian Dollar Weakens as US Dollar Gains on French Fiscal Fears

The Australian Dollar (AUD) weakened by 0.15% against the US Dollar (USD) in early Asian trading on Monday, falling near 0.6935. The decline was driven by the USD's strength, which was boosted by rising concerns over France's fiscal challenges. The US Dollar Index (DXY) surged 0.5% to reach 102.50, its highest level in over 17 months, as investors sought safe-haven assets amid uncertainty.

French fiscal worries intensified after Finance Minister Roland Lescure presented the country's 2027 budget bill last week. Analysts at Brown Brothers Harriman (BBH), including Elias Haddad, expressed doubts that the proposal would pass Parliament without major concessions. Haddad noted that a rollover of the 2026 budget is the most likely outcome due to limited political appetite for compromise before the April 2027 presidential election.

On the monetary policy front, traders reduced expectations for a hawkish Federal Reserve (Fed) move in October following the September US Nonfarm Payrolls (NFP) data, which showed moderate job growth. Meanwhile, technical analysis of the AUD/USD pair suggests further downside potential if it fails to hold the immediate support at 0.6900, with the next target at 0.6866. The pair faces resistance at the 20-day Exponential Moving Average (EMA) at 0.7040.