EUR/USD drops to 1.1161 as fiscal instability in France and a potential shift in ECB hiking cycles pressure the Euro against the US Dollar.
The EUR/USD pair has weakened to 1.1161, its lowest level since May 2025, driven by significant fiscal instability in France. According to BBH's Elias Haddad, this budget crisis is negatively impacting Eurozone bond markets and creating uncertainty regarding the ECB's ability to deploy the Transmission Protection Instrument, while simultaneously fueling market expectations for a less aggressive ECB interest rate path.
The primary driver is the fiscal crisis in France, which is increasing risk premiums in Eurozone bond markets and tempering expectations for ECB rate hikes.
1.1161 represents the lowest level for the EUR/USD pair since May 2025.
The Euro hit its lowest level since May 2025, trading at 1.1161 against the US Dollar. Analysts at Brown Brothers Harriman cite France's deepening budget crisis and shifting European Central Bank policy expectations as primary drivers for the currency's recent underperformance.
The Euro is pressured by France's ongoing budget crisis, which has increased fiscal risk and complicated the potential activation of the ECB's Transmission Protection Instrument.