EUR/USD: No confidence motion in France – OCBC

The Euro (EUR) traded a subdued range, waffling around 1.05 levels. Pair was last at 1.0492, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Political uncertainties may continue to drag on EUR

“French’s minority government faces a real risk of falling apart after far-right and left-wing parties submitted no-confidence motions. Debate is expected to start 4pm local time (11pm SGT) and the voting will commence shortly thereafter. No-confidence motion requires more than half of the lower house votes (i.e. 288 votes) to succeed. No single party or bloc has sufficient votes to pass a no-confidence motion on its own. In the event of a successful no-confidence vote, PM Barnier and cabinet will likely have to resign and the government goes into caretaker mode (to be appointed by President Macron). No legislative elections can be held until 1 year after the last elections that was held in July. In the interim, Macron will need to appoint a new Prime minister.”

“Political uncertainties did not stop at France, In Germany, Chancellor Scholz is expected to call for a vote of confidence on 11 Dec and the Bundestag will vote on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025. Far right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections.”

“Political uncertainties may continue to drag on EUR. But given the bout of uncertainties so far, the EUR has also refused to test much lower. Price action suggests that short EUR trades may be at stretched levels. A flush out of stale EUR shorts cannot be ruled out and that can come of any upside data surprise out of Europe or downside surprise in US data. Daily momentum is mild bullish while RSI is flat. Sideways trade likely. Support at 1.0450 levels before 1.0330. Resistance at 1.0570 (21 DMA), 1.0610 and 1.0670 (38.2% fibo retracement of Oct high to Nov low).”