The euro fell in European trading on Monday against a basket of global currencies, moving into negative territory versus the US dollar and resuming losses that had paused on Friday. The decline came amid political developments in France, particularly following the appointment of a close ally of President Emmanuel Macron as finance minister in the new French government.
With inflationary pressures once again mounting on policymakers at the European Central Bank, market expectations for further rate cuts this year have diminished. Investors are now awaiting additional economic data and comments from ECB officials to reassess the outlook for monetary policy.
Price Overview
EUR/USD today: The euro declined by 0.3% to $1.1706, from Fridays closing level of $1.1741, after recording an intraday high of $1.1731.
On Friday, the euro rose more than 0.2% against the dollar its first gain in three sessions supported by a temporary pause in the greenbacks rally across global forex markets.
Political Developments in France
French Prime Minister Sbastien Lecornu appointed Roland Lescure as finance minister over the weekend in a new government tasked with tackling the budget crisis and securing passage of the fiscal bill. The move was seen by analysts as an attempt to calm markets and build a bridge for negotiation among the countrys fragmented parliamentary blocs.
Lescure, a close ally of President Emmanuel Macron, is viewed as a continuation of Macrons fiscal agenda a perception that has weighed on sentiment toward the new government. Lawmakers have warned that the administration could face swift collapse if it fails to depart meaningfully from previous policies.
European Interest Rates
Data released last week showed that eurozone inflation rose in September in line with expectations, underscoring renewed price pressures facing ECB policymakers.
Following the release, market pricing for a 25-basis-point rate cut by the ECB in October stabilized below 10%.
Traders have scaled back bets on further monetary easing, signaling that the ECBs rate-cut cycle may have effectively ended for this year.
Sources close to the ECB indicated that policymakers see no need for additional rate reductions to achieve the 2% inflation target, despite forecasts suggesting lower rates over the next two years.
Unless the eurozone suffers a major new economic shock, borrowing costs are expected to remain at their current levels for the foreseeable future.