Home Daily Commentaries France and Germany face growing political challenges

France and Germany face growing political challenges

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Friday 29 November, 2024

Daily Currency Update

France's political system is in a delicate position. The Prime Minister, Michel Barnier, is struggling to convince markets it can pass much-needed budget reform and has warned that "mayhem" could erupt in financial markets if the French parliament does not support the budget bill adding that the French Government could fall. After a precipitous fall over the last month the Euro could see its woes deepen considerably.

The Pound traded in a tight range yesterday as the US market was off and there was little economic data released. Markets will be keenly awaiting the Bank of England's December interest rate meeting where it is widely expected there will be no change.

In the US Durable Goods Orders data was released and disappointed markets with a print of +0.2% vs expectations of +0.5%. It is expected that the Federal Reserve will cut borrowing costs by 25 basis points when they meet this December. For now the US Dollar is comfortably holding onto it's November gains.

 

Key Movers

Schnabel, an ECB hawk, has stated that she does not see any risk of inflation undershooting the bank's target rate of 2%. She argued that fiscal stimulus will in no way address the structural issues faced by the Eurozone. Separately, ECB President Christine Lagarde remarked that Trump's "lack of specificity on tariffs to be imposed on Europe may signal that he is open to negotiation." This may offer some reprieve for the beleaguered Euro.

Bank of England officials remain concerned about services inflation, which has stayed above its pre-Covid average and well above rates consistent with 2% inflation. It seems that the ECB is facing similar concerns, with inflation continuously rearing its ugly head while the economy struggles. Adding to the conundrum is the fact that the MPC is decidedly split on interest rate policy and the timing of reducing borrowing costs—a delicate balance.

The US trading session remained exceptionally quiet yesterday, with markets pausing for the Thanksgiving holiday.

Expected Ranges

  • GBP/USD: 1.2680 - 1.2735 ▲
  • GBP/EUR: 1.1995 - 1.2045 ▲
  • GBP/AUD: 1.9480 - 1.9540 ▲
  • EUR/USD: 1.0545 - 1.0600 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.

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