The euro faced significant pressure on Monday due to political uncertainty in France, where Prime Minister François Bayrou called for a confidence vote on September 8th to support his government’s unpopular debt reduction plan, risking its collapse after just nine months.
Opposition leader Jordan Bardella suggested this could mark the end of Bayrou’s centrist government, widening the yield spread between French and German bonds and increasing the euro’s political risk premium, leading to its underperformance against other G10 currencies, particularly the US dollar.
Meanwhile, Dallas Fed President Logan hinted at deploying rate-sealing tools in September to address potential US money market pressures, but avoided commenting on the economic outlook.
In other news, President Trump’s press conference with South Korean President Lee highlighted a US–South Korea shipbuilding partnership to counter China’s naval expansion, discussions about potential talks with North Korea, threats of 200% tariffs on Chinese magnets, and a claim of an imminent resolution to the Gaza conflict.
Additionally, Reuters reported the Trump administration is considering sanctions against EU officials over the Digital Services Act, escalating tensions amid ongoing US–EU trade talks.
Exclusive FX research from LMAX Group Market Strategist, Joel Kruger
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