The euro rose in European trading on Friday against a basket of global currencies, extending its gains for the fourth consecutive session against the US dollar and reaching its highest level in nearly two weeks. It was also on track for its biggest weekly gain in three months, supported by positive political developments in France, the eurozones second-largest economy.

Newly appointed French Prime Minister Sbastien Lecornu suspended the 2023 pension reform until after the presidential elections scheduled for 2027, in a move aimed at easing political and social tensions in the country.

Price Overview

The EUR/USD exchange rate rose by 0.2% to 1.1712 dollars its highest since October 7 from an opening level of 1.1687 dollars, after touching a low of 1.1681 dollars.

The euro ended Thursdays session up by 0.35% against the dollar, marking its third consecutive daily gain, supported by easing political uncertainty in France and continued weakness in the US currency.

Weekly Performance

Over the course of this week, which concludes with todays market close, the euro is up about 0.8% against the US dollar on track for its second weekly gain in the past three weeks and its largest weekly advance since July.

Political Developments in France

French Prime Minister Sbastien Lecornu announced the suspension of the 2023 pension reform until after the 2027 presidential elections, aiming to reduce political and social tensions and responding to strong pressure from left-wing lawmakers who warned that pushing ahead with the reform could threaten the political stability of the new government.

This move allowed Lecornu to survive two no-confidence votes in the French parliament this week, granting his government a temporary reprieve and an opportunity to present a new budget for the eurozones second-largest economy.

Analysts view these developments as a shift toward less austere fiscal policies compared to the previous administration, reflecting Lecornus intent to calm public sentiment and strengthen confidence in his nascent government.

At the same time, French bonds delivered strong performance, becoming the best among their eurozone peers, according to economist Marc Chandler, who noted that markets view the easing of austerity measures and enhanced political stability in Paris positively.

European Interest Rates

Market pricing currently shows less than a 10% probability of a 25-basis-point rate cut by the European Central Bank in October.

Traders have scaled back expectations for further monetary easing by the ECB, suggesting that the current rate-cutting cycle may have ended for this year.

Investors are awaiting a series of upcoming economic data releases in Europe, along with remarks from ECB officials, to reassess the outlook for interest rate policy.