- The EUR/USD is expected to drop to around 1.1730 during early European trading on Monday.
- Fitch Ratings downgraded France’s credit rating on Friday.
- The US Central Bank is anticipated to reduce its rates for the first time since December.
The EUR/USD pair is slipping to roughly 1.1730 in the early hours of European trading on Monday. The euro is losing value against the US dollar, following a downgrade from Fitch Ratings, which lowered France’s credit standing amid ongoing political instability. Traders are likely to keep a keen eye on Christine Lagarde’s speech from the European Central Bank (ECB) as well as the interest rate decisions from the US Federal Reserve this Wednesday.
On Friday, Fitch downgraded France’s credit rating, dropping it from “AA-” to “A+”, marking the lowest level for the country at major credit rating agencies. This change took place shortly after François Beyloux resigned as prime minister following a failed attempt to push through an austerity budget.
The current political instability in France might act as a drag on the euro in the near term. That said, the potential downsides for this currency pair could be somewhat limited. This is mainly due to expectations surrounding the weaker US labor market, which may lead to anticipated rate cuts by the Federal Reserve. The CME FedWatch tool indicates a strong likelihood that the Fed will reduce its main interest rate to 25 basis points (bps) on September 17th.
In another development, the University of Michigan reported on Friday that the consumer sentiment index for September fell to 55.4 from 58.2 in August, which is worse than the market’s expected figure of 58.0 and represents the second consecutive month of decline for the dollar in September.
