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EUR/USD retreats after stalling near 1.1780 resistance – BBH

EUR/USD is under pressure as French political uncertainty intensifies. The failed confidence vote and resignation of Prime Minister François Bayrou highlight deep divisions in parliament, widening OAT-Bund spreads, though euro downside remains contained given the localized nature of the risks, BBH FX analysts report.

PM Bayrou resigns after failed confidence vote

"EUR/USD is trading on the defensive after hitting a multi-week high overnight near 1.1780. Technically, EUR/USD faces stiff resistance at 1.1789 (July 24 high) and 1.1829 (July 1 high). French OAT-German Bund yield spreads widened back to recent highs near 82bps on heightened French political uncertainty."

"As was widely expected, French Prime Minister Francois Bayrou lost a confidence motion in parliament yesterday. President Emmanuel Macron's office said he would accept Bayrou's resignation and appoint a new prime minister in the coming days - his fourth prime minister since the June 2024 snap parliamentary election."

"Regardless of the next prime minister, the political gridlock makes fiscal sustainability nearly impossible to achieve. France’s National Assembly is deeply divided, with no single party holding a clear majority. Bottom line: the political turmoil in France can further widen French OAT-German Bund yield spreads but it’s unlikely to meaningfully weigh on EUR as the situation remains country-specific and not systemic."

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FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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