Euro gains amid revival in demand for French bonds, ECB-Fed policy in focus

The Euro (EUR) strengthened against major currencies on Monday, buoyed by a positive outlook on France's sovereign rating. Moody's maintained France's rating at Aa3, which was unexpected as market participants anticipated a downgrade. Analysts at Danske Bank noted that the agency's decision to retain the rating was surprising, given the expectation of a downgrade.

This assessment was based on the assumption that France would adopt a deficit-reducing budget by 2027, with financing costs and social tensions easing in the coming months.

Meanwhile, markets are looking ahead to monetary policy announcements by the Federal Reserve (Fed) and the European Central Bank (ECB) in the coming days. Both central banks are expected to maintain interest rates at their current levels during these meetings. Investors will closely monitor the Fed and ECB's guidance, particularly whether the recent energy supply shocks have started to be passed on to wages and broader consumer prices.

In the Euro, the German IFO Institute Business Climate Index came in stronger than expected for October, reaching 90.2. This positive sentiment surprised analysts, as they had predicted a lower figure of 89.8. The pair EUR/USD is currently trading around 1.1212, with the pair remaining below its 20-period exponential moving average (EMA) at 1.1254.

This indicates that recent downticks are still putting pressure on the pair, while the Relative Strength Index (RSI) at approximately 39 remains below the neutral 50 line, suggesting only modest recovery attempts within a broader soft bias.

On the upside, the immediate resistance level for EUR/USD is the 20-day EMA near 1.1254. A sustained break above this level would alleviate the current downside pressure and potentially open the door to a more constructive corrective phase. However, until then, the latest lows serve as the informal reference floor, and price action is likely to remain vulnerable to further slippage while remaining below the mentioned moving average cap.