Euro: Fiscal stress and fewer ECB hikes weigh against US Dollar – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad reports the Euro (EUR) is underperforming major currencies, with EUR/USD briefly hitting 1.1161, its lowest since May 2025. Elias Haddad flags France’s budget crisis spilling into wider Eurozone bond markets and complicating potential European Central Bank (ECB) Transmission Protection Instrument activation, leaving the Euro pressured by rising fiscal…
Brown Brothers Harriman's Elias Haddad notes that the Euro (EUR) is currently underperforming compared to other major currencies, with EUR/USD briefly reaching 1.1161, a level not seen since May 2025. This underperformance is attributed to France's fiscal crisis spreading to Eurozone bond markets, compounding the challenge of potential ECB Transmission Protection Instrument (TPI) activation.
The TPI is designed to prevent disorderly spread widening, but its activation depends on EU member states adopting "sound and sustainable fiscal and macroeconomic policies." Haddad points out that France's deteriorating finances complicate the ECB's case for intervention, though broader contagion would further pressure the ECB to act.
Additionally, ECB Chief Economist Philip Lane emphasizes that the increase in long-term interest rates represents a significant tightening of financial conditions for the euro area, contributing to EUR's downside pressure from both rising fiscal risk and a potentially less aggressive ECB hiking cycle. Immediate support levels for EUR/USD are identified as 1.1200 (August-September 2024 double top) and 1.1111 (50% retracement of the 2025-2026 uptrend).
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