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Published: 28 October 2026,03:36
Daily Market Analysis New
*Political unrest and budget uncertainty have widened French-German bond spreads to eurozone debt-crisis levels, weighing on investor confidence and the EUR.
*The ECB is widely expected to hold rates at 2.50%, as policymakers assess inflation and previous tightening. A cautious stance could leave the euro vulnerable to policy divergence.
*Persistent French political instability and widening fiscal concerns may extend EUR weakness, while stabilising bond spreads or improved inflation signals could provide temporary relief.
The euro has delivered one of the weakest performances among G10 currencies over the past week, weighed down by escalating political and fiscal challenges in France. Widespread protests over living costs and public services, combined with persistent difficulties in passing a credible budget, have driven French government bond yields higher and widened the spread over German bunds to levels not seen since the eurozone sovereign debt crisis. These developments have heightened investor concerns about the second-largest economy in the currency bloc and contributed to broader pressure on the single currency.
The European Central Bank is widely expected to leave interest rates unchanged at its meeting tomorrow, keeping the deposit facility rate at 2.50 percent following the September increase. Markets assign a very high probability to a hold as policymakers assess the impact of earlier tightening and monitor the transmission of elevated energy prices into underlying inflation. While a pause allows the Governing Council to gather more data ahead of updated projections in December, it risks widening the interest rate differential with other major central banks that may continue tightening. This dynamic could add further downside pressure on the euro in the near term.
Looking ahead, the currency faces a challenging environment. French political uncertainty and elevated borrowing costs are likely to remain a headwind, particularly if social unrest continues or fiscal consolidation efforts stall. An ECB hold that is already priced in offers limited support, and any cautious or dovish messaging in the accompanying statement could reinforce selling pressure. Sustained relative policy divergence with other central banks would further constrain the euro’s recovery potential. While a stabilization in French markets or clearer signs of controlled inflation could provide temporary relief, the near-term outlook remains tilted toward further weakness until political and fiscal risks in France ease meaningfully.
Technical Analysis
EURUSD, H4:
EUR/USD has broken below its week-long consolidation range and is now retesting its previous low near the 1.1110 level, reinforcing the prevailing bearish bias. A decisive break below this key support would confirm the bearish continuation signal and potentially pave the way for further downside.
As long as selling pressure remains elevated, the near-term outlook is likely to remain tilted to the downside. A sustained breakdown below 1.1110 could expose the next key psychological support at 1.1000. However, a successful defence of the 1.1110 level could trigger a technical rebound or renewed consolidation before the pair establishes its next directional move.
Resistance Levels:1.1163, 1.1263
Support Levels:1.1086, 1.1000
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