The EUR/USD currency pair is experiencing a downturn at the beginning of this week, reversing the gains observed in the previous week. This decline is fueled by a strengthening US dollar and growing political instability in France. For those monitoring exchange rates, the prospect of seeing 2.00 Eur To Usd now seems increasingly remote as the euro weakens.
France is currently facing a significant political crisis as the far-right National Party pressures Prime Minister Michel Barnier to concede to their demands regarding the proposed budget. The party has set a deadline for today, threatening a vote of no confidence if their conditions are not met. This precarious situation places Prime Minister Barnier in a difficult position. Yielding to the National Party’s demands risks further economic fragility due to increased government spending. However, refusing to compromise could lead to the collapse of the coalition government, deepening the political uncertainty.
The financial markets are reacting to this turmoil. French borrowing costs have surged to their highest level relative to German borrowing costs since the Eurozone crisis in 2012, reflecting investor concerns. The French CAC stock market index is also experiencing a sharp decline, indicating the market’s negative sentiment towards the political instability.
Adding to the Eurozone’s woes, the latest manufacturing PMI data confirmed a continued contraction in the sector. The Eurozone manufacturing PMI remained at 45.2, signaling a deepening downturn. This contraction is widespread across major European economies, with both Germany and France reporting particularly weak manufacturing activity. This economic data further weakens the euro’s position against the US dollar.
Conversely, the US dollar is gaining strength as investors seek safe-haven assets amidst global uncertainties. President Trump’s recent threats of imposing 100% trade tariffs on BRICS countries if they challenge the US dollar’s dominance have further bolstered the dollar’s appeal. These geopolitical factors are contributing to the USD’s upward momentum.
Market attention is also focused on the US Federal Reserve as a week packed with crucial US economic data unfolds, culminating in the nonfarm payroll report on Friday. This data is particularly significant as the Fed considers whether to implement another interest rate cut this month, following two consecutive rate reductions. Currently, market expectations are pricing in a 66% probability of a 25 basis point rate cut in December. Adding to the market anticipation, several Fed officials, including Chairman Jerome Powell, are scheduled to speak this week, providing further insights into the central bank’s monetary policy outlook.
EUR/USD Forecast – Technical Analysis
From a technical analysis perspective, the EUR/USD pair’s recent rebound from a low of 1.0330 proved to be short-lived. The pair failed to overcome key resistance levels at 1.06 and 1.07, which were crucial to reversing the steep downtrend that began from the 1.12 peak in late September. Furthermore, the Relative Strength Index (RSI) remaining below 50 indicates that sellers continue to dominate the market momentum.
For sellers, the immediate target is to break below the 1.05 level, paving the way to retest the 2023 low at 1.0450. A decisive break below 1.0330 would establish a new lower low, reinforcing the bearish trend. On the upside, buyers need to reclaim the 1.06 level to have any realistic chance of establishing a base for a potential upward move. Until this level is breached, the path of least resistance for EUR/USD appears to be downwards, making the idea of 2.00 EUR to USD seem like a far-off prospect in the current market conditions.
FTSE Inches Higher Amid Mixed Global Cues: China Surges, UK Lags
The FTSE index is currently trading in a narrow range as investors grapple with a mix of global economic signals. Positive manufacturing data from China is being weighed against political uncertainty in France and disappointing manufacturing PMI figures from the UK.
Data emerging from China reveals a robust expansion in manufacturing activity, reaching a five-month high. The Chinese manufacturing PMI climbed to 51.5 in November, exceeding the forecast of 50.5. Notably, new orders for manufacturers are growing at their fastest pace in three years, suggesting that recent stimulus measures implemented by the Chinese government are beginning to stimulate economic activity.
This positive news from China is providing a boost to mining stocks on the FTSE, with companies like Anglo American and Rio Tinto experiencing gains of around 1%. However, the overall gains on the FTSE are limited by other factors.
In contrast to China’s positive data, the UK manufacturing PMI presented a more downbeat picture. The UK manufacturing PMI fell to 48 in November, down from 49.9 in October, marking a nine-month low. This decline reflects a contraction in new orders and indicates headwinds facing UK manufacturers. These challenges include increased employment taxes following the New Labour government’s budget, a 7% rise in the minimum wage, ongoing disruptions to shipping in the Red Sea, and the looming threat of global goods tariffs.
Furthermore, the political instability in France is also contributing to market caution, limiting any significant upward movement on the FTSE. Prime Minister Barnier’s government remains in a precarious position, adding to the overall sense of uncertainty in the European markets.
FTSE Forecast – Technical Analysis
Technically, the FTSE continues to trade within a well-defined range, with resistance around 8325 and support at 8150. While the index has recovered from its November low of 8000, climbing above both the 200-day and 50-day Simple Moving Averages (SMA), a decisive breakout above 8325 is needed to target higher levels, potentially reaching 8400 and then the all-time high of 8480.
Immediate support for the FTSE is identified at 8230, near the 50-day SMA. A break below this level could bring 8150 back into focus as a key support zone, which also aligns with the 50-day SMA, reinforcing its significance. Until a clear break outside of this range occurs, the FTSE is likely to remain in its current holding pattern, influenced by the conflicting global economic and political signals.
