Euro edges higher above 1.1200 despite French debt worries

The EUR/USD exchange rate rose above 1.1200 despite concerns over France's deteriorating economic situation. Protests in France over rising living costs and inequality turned violent for a second weekend in a row, with around 410,000 people participating in demonstrations in major cities like Paris. France's Interior Ministry reported the unrest, which may have resulted in some downward pressure on the shared currency.

The European Central Bank (ECB) is scheduled to meet on Thursday to review interest rates, though a rate hike is unlikely before the end of the year. Markets will closely watch the ECB's policy outlook, as President Christine Lagarde recently suggested a moderate approach to inflation. In contrast, the US Federal Reserve (Fed) is expected to keep interest rates unchanged during the upcoming October meeting on Wednesday, with a 90.6% probability according to the CME FedWatch tool.

Strategists note that "above-target Eurozone inflation and a resilient growth outlook provide the ECB with room for additional rate hikes," but they also caution that "France's fiscal troubles could push EUR/USD down to 1.1000." Fed Chair Jerome Powell's speech received a 5.6/10 rating on the FXS Speechtracker, slightly below the historical average of 6.1/10, indicating a slightly less impactful but still consistent tone.

Overall, the cautious yet constructive tone from the Fed and ECB, combined with weak Eurozone inflation data and a resilient growth outlook, supports the Dollar against the Euro in the short term.