EUR/USD softened to 1.1710 after French PM Lecornu confirmed that Parliament will miss year-end budget approval, forcing a special rollover law. Despite this fiscal setback, the European Central Bank’s (ECB) hold on rates at 2.00% and upward revisions to growth and 2026 inflation underpin the euro, with rising wage pressures adding to the currency’s support, BBH FX analysts report.
Eurozone growth upgraded, inflation pressures remain sticky
“EUR/USD is trading heavy near 1.1710 after testing an intra-day high of 1.1763 yesterday. French Prime Minister Sebastien Lecornu confirmed the inevitable; Parliament will not be able to pass a budget before the end of the year. As a result, the government will start the process of filing a ‘Special Law’ bill that allows it functionally to roll over the 2025 budget into next year. France’s failure to repair public finances can lead to further bouts of fiscal stress and is a headwind for EUR.”
“Otherwise, ECB/Fed policy stance continues to underpin the uptrend in EUR/USD. As was widely expected, the ECB left the policy rate unchanged at 2.00% for a fourth consecutive meeting.”
“The ECB’s updated macroeconomic projections reinforce the case that the bank is in a good place to keep rates on hold for some time and that the next move is a hike. Eurozone economic growth is expected to be stronger than in the September projections and inflation has been revised up for 2026 due to stickier services inflation. Indeed, the ECB’s Q3 negotiated wage tracker released today points to rising wage pressures.”
Source: https://www.fxstreet.com/news/eur-usd-pulls-back-near-11710-on-french-fiscal-headwinds-bbh-202512191214
