EUR: French political noise returns – ING

Some headlines about French politics might have gotten into the mix on a bad day for the euro yesterday, although no spillover into the OAT-Bund spread means the effect should have been marginal if anything, ING's FX analyst Francesco Pesole notes.

EURUSD remains an extension of broader USD sentiment

"The French Prime Minister announced that two national holidays would be scrapped to ease pressure on the deficit. That caused the National Rally’s Marine Le Pen to threaten to topple the government unless the proposal is lifted. The French deficit story has been very much in the background as of late, but yesterday probably served as a reminder that it is a ticking bomb for EU sentiment. And we could start seeing some FX spillovers in the coming months."

"For now, EURUSD remains an extension of broader dollar sentiment. We think 1.16 can be a good balance unless data adds much to the US macro story in the next days. Risks are, however, that the dollar gets a bit more support from hawkish repricing and EUR/USD starts looking at 1.15."