Euro Dips Below 1.1250 Amid France Debt and Spain Election Fears
The Euro weakened against the US Dollar early Tuesday, dipping to around 1.1220 during Asian trading. The decline came amid growing concerns over France's rising debt costs and strained public finances. French Prime Minister Sébastien Lecornu's minority government recently announced a €54 billion savings plan to prevent a potential downgrade or sovereign default. Lecornu warned that without action, the budget deficit could balloon to 6.5%, up from the current 5.5% of GDP.
Political turmoil in Spain added to the Euro's downward pressure. Spanish Prime Minister Pedro Sanchez called a snap election for November 29, seeking to bolster his parliamentary support after lawmakers rejected proposals to address a housing crisis. Analysts noted that Europe is under scrutiny due to fiscal and political challenges, with France at the center of concerns.
The Euro also faced pressure from the European Central Bank's (ECB) complicated position. Strategists at Brown Brothers Harriman highlighted that the ECB's Transmission Protection Instrument, designed to shield Eurozone debt markets, requires EU members to pursue sustainable fiscal policies, a condition France is struggling to meet. This complicates the ECB's ability to intervene, even as the risk of broader market contagion grows.
On the technical front, the EUR/USD pair maintained a bearish tone, trading below key moving averages. The Relative Strength Index (14) around 19 indicated oversold conditions, raising the possibility of a corrective bounce from nearby support. Immediate resistance was seen at 1.1420, while further downside could target the lower Bollinger band at 1.1170.