The Euro (EUR) continues to trade near one-month lows against the U.S. Dollar (USD), hovering around 1.1635 during Wednesday’s European session. The pair remains weighed down by mounting political uncertainty in France and a stronger U.S. Dollar ahead of the release of the Federal Open Market Committee (FOMC) minutes and a series of speeches from Federal Reserve (Fed) and European Central Bank (ECB) officials, including President Christine Lagarde.
The Common Currency came under renewed pressure earlier in the day as French President Emmanuel Macron faced rising calls from both opposition leaders and former allies to hold snap elections amid growing internal dissent. The ongoing turmoil has raised fears of prolonged political instability, with credit rating agencies warning that France’s sovereign rating could face further downgrades if the crisis drags on.
Political Uncertainty Pressures the Euro
Political instability in France continues to weigh heavily on the Euro, extending its decline against the Greenback. Earlier on Wednesday, former Prime Minister Sébastien Lecornu said he would present a potential resolution to President Macron later today, downplaying the possibility of dissolving the parliament. While his remarks provided temporary relief, sentiment around the Euro remains broadly bearish.
Adding to the pressure, recent Eurozone data has failed to inspire confidence. Germany’s Factory Orders dropped 0.8% in August, missing expectations for a 1.4% increase, following a steep 2.7% decline in July. On a yearly basis, orders rose just 1.5%, compared to a 3.3% fall in July — further evidence of slowing industrial momentum across Europe.
Meanwhile, ECB President Christine Lagarde reiterated on Tuesday that the Eurozone’s disinflation process is largely complete. She expressed optimism that France will fulfill its budgetary commitments despite ongoing political challenges. However, investors continue to price in a cautious outlook for the Euro, expecting limited room for ECB policy tightening.
Dollar Gains on Safe-Haven Demand Amid U.S. Shutdown
Across the Atlantic, the U.S. Dollar remains firm as investors seek safety amid the ongoing U.S. government shutdown, now in its second week. Political gridlock persists as Senate leaders from both major parties struggle to reach a funding agreement. According to a Polymarket survey, the odds of resolving the shutdown this week have fallen to just 23%, dampening overall market sentiment but supporting the Greenback’s safe-haven appeal.
In the United States, the focus now shifts to the FOMC minutes from the September meeting, due later today. Investors expect fresh insights into the Fed’s decision to cut interest rates by 25 basis points and clues on whether more easing measures are on the horizon. Diverging views among Fed officials continue to fuel uncertainty — with Minneapolis Fed President Neel Kashkari warning of renewed inflation risks if rate cuts accelerate too quickly, while newly appointed Fed Governor Stephen Miran argued that population growth-driven inflation warrants a gradual easing approach.
Outlook
With France’s political crisis deepening and the U.S. Dollar supported by safe-haven flows, EUR/USD remains vulnerable to further downside. Unless European political stability improves or upcoming U.S. data weakens the Greenback, the pair may continue testing lower levels in the near term, particularly if the FOMC minutes signal a hawkish tone.
