- EUR/USD trades in negative territory for the second consecutive day near 1.0490 in Tuesday’s early European session.
- Growing concerns about a possible government collapse in France undermine the Euro.
- US Manufacturing PMI came in stronger than expected in November.
The EUR/USD pair loses ground to around 1.0490 during the early European session on Tuesday. The Euro (EUR) weakens against the Greenback as a budget standoff in France fuelled concern about the Eurozone’s second-biggest economy.
The French Prime Minister Michel Barnier’s plan to pass a social security bill without a parliamentary vote has prompted opposition parties to declare their intention to vote for a no-confidence motion against Barnier. This move is likely to cause the French government to collapse this week.
The political uncertainty in France exerts some selling pressure on the shared currency. Meanwhile, the yield spread between French and German 10-year government bonds rose 7.6 basis points (bps) to 87.3 bps after reaching 90 bps last week, its highest level since 2012. “Crashing political sentiment in France and another activity data beat in the U.S. have handed the euro a dire start to December,” said Kyle Chapman, FX market analyst at Ballinger Group.
Across the pond, US economic data released on Monday showed US manufacturing activity improving in November, suggesting that the US economy remains robust, lifting the US Dollar. However, the US Federal Reserve (Fed) remains data-dependent, and the employment report due on Friday will be closely watched. The Nonfarm Payrolls (NFP) might offer some hints as to whether the Fed would cut rates again on December 18.
