MORGANABLE BUSINESS / MARKETS & MONEY
The US dollar held firm on Monday as the euro weakened after violent protests in France raised concerns about political stability and public finances.
Akure —
The US dollar held firm on Monday as the euro weakened after violent protests in France raised concerns about political stability and public finances.
The euro fell about 0.1% to $1.1225, while the dollar index stood near 101.83. Later, the euro slipped to $1.1210, down 0.25%.
The protests followed public anger over the cost of living. French President Emmanuel Macron condemned the violence and rejected Interior Minister Laurent Nuñez’s offer to resign.
The unrest has added uncertainty as the government faces difficult budget talks and pressure to control public debt.
Investors are also watching energy prices, bond yields and interest-rate expectations in the United States and Europe. These factors are shaping demand for major currencies.
FRENCH UNREST WEIGHS ON THE EURO
The euro’s decline helped steady the dollar because the single currency carries the largest weight in the US dollar index.
When the euro falls, the index can rise even if the dollar changes little against other currencies. This made developments in France important for traders today.
Analysts say the unrest matters mainly through its possible effect on French government bonds. If investors believe political tensions could weaken the government’s ability to manage public finances, they may demand higher returns to hold French debt. That can raise borrowing costs and pressure the euro.
The difference between French and German 10-year government bond yields rose above 150 basis points earlier in October before easing. On Monday, the spread stood near 141 basis points, according to market reports. The gap shows how investors view French debt compared with German bonds, often treated as safer.
A wider spread does not automatically mean a financial crisis is approaching. Still, another increase could signal growing concern about France’s political and fiscal outlook. Calmer markets and progress in budget talks could ease pressure on the euro.
BUDGET TALKS ADD TO MARKET CONCERNS
France is preparing its 2027 budget amid deep political divisions. The government wants to reduce the deficit, but lawmakers disagree over spending cuts and other measures. This makes support for a fiscal plan uncertain.
France’s high public debt leaves the government exposed when borrowing costs rise. Higher yields mean the state must pay more to refinance existing obligations and fund new borrowing. Over time, these costs can limit spending choices and make deficit reduction harder.
Political uncertainty can delay decisions investors want to see. If lawmakers fail to agree on a budget, markets may question whether France can meet its fiscal goals. That could weigh on French bonds and affect confidence in the wider eurozone.
One weekend of unrest does not determine the euro’s direction by itself. Traders will look for signs that protests are spreading, budget talks are stalling or bond yields are rising. If these risks remain contained, the currency could stabilise.
DOLLAR GAINS SUPPORT FROM RATE EXPECTATIONS
The dollar drew support from expectations that the US Federal Reserve will keep interest rates unchanged at its next meeting, scheduled to begin on October 28. Investors are weighing inflation risks against signs of economic resilience.
Interest-rate expectations affect returns on assets held in a currency. If US rates remain higher than rates elsewhere, dollar assets may look more attractive. However, currency movements also depend on economic data, investor confidence and other central banks’ policies.
The outlook is not entirely positive for the dollar. Some investors worry that slower spending on artificial intelligence could weaken US growth.
If companies reduce investment or hiring, the economy could lose momentum and Treasury yields could fall, limiting the dollar’s gains.
Energy prices are another influence. Higher oil and gas costs can hurt Europe because many countries depend on imported energy. The United States is less exposed, so sustained price rises can affect the economies differently. The impact depends on inflation and the size of the increase.
OTHER CURRENCIES MOVE IN DIFFERENT DIRECTIONS
The dollar traded around 158 yen on Monday, little changed against Japan’s currency. Bank of Japan Governor Kazuo Ueda said underlying inflation was close to the central bank’s 2% target, keeping a possible rate increase in focus. However, concerns about Japan’s finances continued to influence trading.
Against the offshore Chinese yuan, the dollar was near 6.6842 as investors awaited China’s third-quarter economic figures. The Australian dollar rose about 0.3% to $0.6965, while the New Zealand dollar changed little near $0.5656. The British pound held around $1.3329.
Stronger Chinese growth could support currencies linked to trade and commodities. Political or financial risks can weaken a currency even when its economy remains large.
CENTRAL BANK MEETINGS IN FOCUS
Investors are preparing for decisions from the Federal Reserve and the European Central Bank. The Fed’s meeting begins on October 28, while the ECB is scheduled to announce its decision on October 29. Traders will look for clues about inflation, growth and interest rates.
For the euro, the ECB’s outlook will be important. Higher rates can support a currency by improving returns on deposits and bonds. However, rate increases can also slow borrowing and spending. They may not offset political uncertainty or concerns about government debt.
Investors will track French bond yields, the protests and progress on the 2027 budget. A wider gap between French and German yields could pressure the euro. Signs of political calm or progress toward a budget agreement could improve confidence.
For now, the dollar remains supported as the euro faces uncertainty. Yet the outlook could change if tensions ease, economic data surprise markets or central banks signal a different approach to rates. Traders will remain cautious as they assess whether the decline will continue.
