The outgoing French prime minister has been asked by President Macron to give one final shot at bringing together the deeply divided parliament and form a government that can deliver on urgent budget issues, ING's FX analyst Francesco Pesole notes.

USD to face downside risks with today’s Fed minutes

"The deadline is set for tonight. Should talks fail, snap elections may well become the base case, with also an increased risk of Macron resigning too, although the latter is way less likely. Betting markets place a 60-65% probability of legislative elections being called by the end of next week, and only 15% of Macron’s presidency ending before year-end."

"If snap legislative elections are called, we could see another ~0.2-0.5% knocked off EUR/USD as it would imply a delay in budget decisions and could add pressure on OATs. The formation of a new government today may not yield huge benefits to the euro, considering the fragility of any political agreement at this stage."

"But based on our view that the dollar will face downside risks with today’s Fed minutes and the USD rally looking a bit overdone in general, we think EUR/USD back at 1.170 is more likely than a test of 1.150 in the coming days."