The Euro (EUR) is facing selling pressure near 1.1215 against the US Dollar (USD) during early Asian trading on Monday. The weakness in the Euro comes amid growing fiscal risks in France, where the French debt risk premium surged in early October. The spread between French and German 10-year government bonds has widened beyond 150 basis points, reaching its highest level since the Eurozone debt crisis in 2011.
Protests in France have escalated into violent clashes between police and demonstrators, leading to widespread destruction and looting. French President Emmanuel Macron expressed anger and shame over the violence and called for the restoration of order. European Central Bank (ECB) President Christine Lagarde emphasized that France must address its structural problems through domestic fiscal policy.
Meanwhile, Spain is heading to a snap general election on November 29, adding to political instability in the Eurozone. Across the Atlantic, Federal Reserve (Fed) Chair Kevin Warsh offered no clear indications about future rate decisions, stating he does not 'prejudge meetings.' Markets currently price in an 83.9% chance that the Fed will keep rates unchanged later this month.
Analysts at Nordea maintain a constructive view on the ECB’s tightening path, expecting two further 25 basis point rate hikes, one in December and another in March 2027. They also see modest upside potential for longer EUR yields in the medium term, though caution that short-term corrections could occur if inflation data shows limited broadening or growth concerns become more prominent.