French Unrest Weakens Euro, Affecting Global and Local Markets
Translated & summarized from Calcalist by baba
The story in 5 lines · by baba
- French unrest is causing a significant drop in the euro's value globally and against the Israeli shekel.
- Concerns exist about political paralysis in France hindering budget cuts and resolving the debt crisis.
- The dollar strengthened against major currencies, while the euro and pound declined.
- Weak US jobs data has lowered expectations for Federal Reserve rate hikes.
- Investors see the dollar as a safe haven amid global bond market sell-offs.
The dollar opened the foreign exchange trading week strongly on global markets, primarily at the expense of the euro, amidst severe unrest in France. Concerns are focused on potential political paralysis in France, which could hinder the government's ability to implement its 54 billion euro budget cuts for 2027, leaving the domestic debt crisis unresolved. The Israeli market also saw a significant drop in the euro's value against the shekel, with a slight movement in the US dollar. The dollar traded slightly above 3.04 shekels, while the euro lost 1% against the shekel, following a similar decline on Friday, trading around 3.40 shekels.
Globally, the dollar index, which measures the dollar against major world currencies, rose by 0.5% to 102.5 points. The euro fell by 0.7% to trade below $1.12, the British pound dropped 0.3% to around $1.32, and the dollar gained 0.2% against the Japanese yen, reaching 158.1 yen.
Adding to the market backdrop were weak US employment figures released on Friday. September saw only 29,000 new jobs created, and the unemployment rate rose to 4.2%, exceeding expectations of 84,000 new jobs and a 4.1% unemployment rate. August's figures were also revised downward. Following these reports, investors now price in a 78% probability that the Federal Reserve will keep interest rates unchanged at its upcoming meeting on October 28th, a significant increase from 36% a week prior. However, rate hikes are still anticipated in December and twice in the first half of 2027.
Mohit Kumar, a strategist at Jefferies, stated that the firm's base scenario involves one rate hike by the Fed and one by the European Central Bank. He noted that by March, either oil prices will decrease, or growth will slow if prices remain high, suggesting that central banks may not implement all the rate hikes currently priced in by the market. Matthew Ryan, Head of Market Strategy at Ebury, commented that the dollar is the primary beneficiary in the current environment, with rising US bond yields increasing the attractiveness of American assets and a broad sell-off in global bonds driving funds into the dollar as a safe haven.
