The Euro gets the PMIs first and France's credit rating over the weekend
France's 10-year government bond yield went above 5% on Wednesday for the first time since 2002, and the Euro hardly moved on it. EUR/USD trades just under 1.1250, and each of its four rallies since October 2 has stopped lower than the one before.
On Wednesday, France's 10-year government bond yield surpassed 5% for the first time since 2002, but the Euro remained relatively stable at just under 1.1250 against the US Dollar. The spread between France and Germany widened to about 1.6 points, the widest since 2012. French government debt is nearly 120% of the economy, and debates on the 2027 budget resumed after extensive amendments.
Concerns about France's fiscal policy and the potential impact on the Eurozone are heightened by student protests and police involvement in upcoming marches. The European Central Bank's deposit rate is 2.50%, and traders anticipate a 95% chance it remains unchanged at its October meeting. Euro area inflation stood at 3.8% in September, driven by a 18.9% surge in energy prices.
Despite potential rate hikes by both the Federal Reserve and ECB, the spread between US and Eurozone rates is unlikely to change before December. The Euro faces internal challenges, with market risks stemming from within Europe. Moody's reviews of France's credit rating coincide with the release of Eurozone PMI figures on Friday, providing additional market insights.
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