Euro holds gains above 1.1200 despite French turmoil

EUR/USD gains ground to around 1.1215 in Tuesday’s early Asian session.
France imposes partial curfews in several cities, including parts of Paris.
Fed’s Warsh boosts market expectations of a rate hold in October.

The EUR/USD pair holds positive ground near 1.1215 during the early European session on Tuesday. However, the potential upside for the pair might be limited as violent protests in France add to concerns about the country's worsening fiscal outlook. The German Zew Survey and US ADP employment reports are due later on Tuesday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

BBC reported on Monday that French authorities have imposed overnight curfews in parts of central Paris and other cities after a weekend of riots and looting across the country. French Prime Minister Sébastien Lecornu said on Monday that he was “fully resolved to restore public order” and had called for “local and partial” curfews if needed. There was “no question” of imposing a full curfew on entire cities, he said.

This move provides little support to the shared currency. Traders will closely monitor the developments surrounding France’s fiscal and political risks. Any signs of escalation could act as a headwind for the major pair.

The spread between French government bonds and safe-haven German Bunds has widened to 147 basis points (bps), reaching levels not seen since the 2011–2012 European debt crisis, up from approximately 110 bps in late September.

Across the pond, Fed Chair Kevin Warsh last week expressed optimism about US economic strength but did not indicate whether or when more hikes would be needed. Fed funds futures traders see the Fed holding rates steady at its October policy meeting and are pricing in an 82.8% probability of a rate hike in December, according to the CME FedWatch tool.

Euro underperforms as France unrest and geopolitical risks weigh on assets

Strategists at Scotiabank highlight that the Euro is lagging its peers, noting that “the EUR is underperforming following widespread and violent protests across France against poor conditions in schools and hospitals and broader concerns about affordability.” They add that the political backdrop is feeding through to local markets, with “French stocks and bonds underperforming and bond spreads versus Germany have widened to 145bps, sitting at the top of the (recent) historic range.” Geopolitical tensions are compounding the cautious tone after “President Zelenskyy said the US is pushing Ukraine, not Russia to concede, adding to geopolitical concerns,” reinforcing a more challenging environment for the EUR complex.

Warsh flags investment surge and AI risks but avoids pre-committing on policy

Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly softer relative to the historical average of 6.1/10, reflecting a cautious tone despite upbeat references to structural growth and an investment surge. The remark about being “over-scarred from the global financial crisis” underscores a persistent risk-averse bias, even as Warsh highlights policy-driven investment strength and refuses to prejudge upcoming October and December meetings, keeping Dollar traders focused on data-dependent outcomes and potential “crystalizing” decisions later this year. Warsh’s emphasis on AI as a demand-side force and on tail-risk management adds a forward-looking, financial-stability layer that tempers any near-term hawkish read-through.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 127.51, signaling that the speech leaves the broader policy narrative firmly in hawkish territory despite the slightly softer FXS Speechtracker score. For FX markets, the combination of a high FXS Fed Sentiment Index and a non-committal tone suggests the Dollar remains underpinned by expectations of continued vigilance on inflation and financial stability, even without explicit guidance on the path for 2026 meetings.

Technical Analysis: EUR/USD retains a negative tone below the 100-day SMA

In the daily chart, EUR/USD keeps a bearish near-term bias as spot holds beneath the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-period middle band. The pair is also capped by the upper Bollinger band, while the Relative Strength Index (RSI) at 38 suggests weak but stabilizing downside momentum after exiting oversold territory.

On the topside, initial resistance emerges at the Bollinger middle band near 1.1260, followed by the upper band around 1.1410 and the 100-day SMA at 1.1462. On the downside, the lower Bollinger band at 1.1110 offers the next noteworthy support, where a break would open the way to a deeper slide, while holding above it would keep the pair in a consolidative phase within the current bearish structure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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