EUR/USD edged lower this week amid rising US rates and FOMC risk, with near-term support at 1.1585/90, while eurozone fiscal and geopolitical developments—including French budget hurdles and potential use of frozen Russian assets for Ukraine—remain in focus but are unlikely to undermine the euro’s safe-haven appeal, ING's FX analyst Chris Turner notes.

French fiscal challenges and EU plans for Russian asset use keep EUR on watch

"The EUR/USD has moved slightly lower as USD rates have increased this week. The FOMC risk is a negative one for EUR/USD. A bearish re-pricing at the short end of the US curve could trigger a drop back to the 1.1585/90 area. There is also an outside risk of 1.1555/65 in thinning year-end markets. However, EUR/USD may not stay down there long, and we would continue to favour a bounce back – potentially as high as 1.1800 – by the end of the year."

"In eurozone domestic politics, we've seen France pass an important social security budget. Yet the difficulty in getting that done bodes ill for getting a 2026 state budget passed this year and French fiscal risk will remain a weight on the euro in 2026. At the geopolitical level, there is a focus this week on EU officials using emergency powers to outmaneuver Hungary and freeze EUR210bn of Russian assets, to be used as a reparation loan for Ukraine. European leaders are desperate to make this happen, such that Ukraine is not bulldozed into a ceasefire by the US and Russians."

"On that subject, political consultants suggest that a ceasefire deal is still possible. We mention all this in the context of the euro, since some asset managers are concerned that the abuse of property rights could undermine the safe haven status of the euro. We have seen no indication of that in any flow data so far, and as long as the ECB is not drawn in to back-stopping Ukraine loans, we doubt this development will notably weigh on the euro."