EUR/USD Struggles Amid French Downgrade

The EUR/USD pair has faced challenges once again, hovering around 1.1660 during Asian trading on Monday. The euro saw a dip following a Bloomberg report stating that S&P Global Ratings downgraded France’s credit rating from AA- to A+. This decision stems from “increased” budget uncertainty, despite the French government having submitted its budget for 2025.

In just over a month, France has lost its AA- rating with two of the three major credit rating agencies, with prior downgrades from Fitch and DBRS. This downgrade follows a tumultuous week of politics where Prime Minister Sébastien Lecornu narrowly escaped two votes of no confidence in parliament. To maintain control, the new administration had to abandon President Emmanuel Macron’s widely criticized pension reform for 2023.

Meanwhile, the US dollar is experiencing pressure due to an ongoing federal government shutdown, which may restrict further declines in the EUR/USD pair. The shutdown has reached its 19th day, and there appears to be no resolution, as senators failed for the 10th time to resolve the impasse after a vote on Thursday. This marks the third longest funding shortfall in modern U.S. history.

Yet, the dollar may not fall too sharply as trade tensions between the US and China begin to ease. President Trump mentioned over the weekend that he hopes China will buy back the same amount of soybeans as before, expressing optimism about reaching a deal. “We can reduce the tariffs that China pays, but they also have to do something for us,” he added.

Upcoming meetings between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng aim to address these tensions ahead of a scheduled meeting between President Trump and President Xi Jinping later this month.