The euro is facing severe challenges as political unrest in France coincides with a positive economic data release from the US, leading to a dramatic dollar gain.
The budget passed without a parliamentary vote highlights the political instability in France, contributing to an 88bps OAT-Bund spread, the highest in 12 years.
With French elections postponed until summer, the interim government’s looming no-confidence vote deepens the uncertainty, stalling potential measures to curb the deficit.
Despite the weak manufacturing growth in the US, the ISM index’s rise to 48.4 suggests improved conditions which may allow the Fed to maintain current rates.
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