The seemingly inevitable end to Michel Barnier’s short-lived government has added an extra risk premia to the euro.
A motion of no confidence may be voted on as early as today, with all signs suggesting that it will receive enough support from the right- and left-wing parties in order to pass. There will be no election before at least July 2025, as the constitution stipulates a minimum of one year in between elections.
Finding a replacement for Barnier will also be difficult, as will the passing of a 2025 budget before the end of the year. The government could merely replicate the 2024 budget for next year, but that won’t provide the economy with the cohesive fiscal support that it needs, and the emphasis may be squarely on the ECB to support demand through even lower rates in 2025.
The second estimate of the November Euro Area PMI figures will be out this morning. This will be followed by public remarks from ECB members Cipollone and Lagarde later this afternoon.
Another rate cut from the Governing Council appears to be set in stone this month, but investors are keen to gauge whether recent underwhelming economic news out of the bloc will force policymakers to deliver a 50 basis point rate reduction at some stage in the coming months. Swaps currently see 65 basis points of cuts in the next two meetings, so clearly this is viewed as a very realistic possibility.
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
Recommended Content
Editors’ Picks
EUR/USD holds near 1.0500 ahead of Powell speech
EUR/USD holds steady at around 1.0500 in the American session on Wednesday. The weaker-than-expected ADP Employment Change and the ISM Services PMI data hurt the USD and help the pair keep its footing. Fed Chairman Powell will speak later in the day.
GBP/USD recovers toward 1.2700 after US data
Following a pullback, GBP/USD edges higher toward 1.2700 in the second half of the day on Wednesday as the US Dollar loses strength following the disappointing data releases. Markets eagerly await Fed Chairman Jerome Powell's speech.
Gold advances to $2,650 area as US yields edge lower
Following a consolidation phase near $2,640, Gold gains traction and rises to the $2,650 area. The benchmark 10-year US Treasury bond yield pushes lower after weak macroeconomic data releases from the US, helping XAU/USD stretch higher.
UnitedHealth unit CEO murdered early Wednesday in Manhattan Premium
UnitedHealthcare CEO Brian Thompson was gunned down in Manhattan Wednesday morning. Thompson was shot by a masked gunman as he was in the city for an investor meeting.
Four out of G10
In most cases, the G10 central bank stories for December are starting to converge on a single outcome. Here is the state of play: Fed: My interpretation of Waller’s speech this week is that his prior probability for a December cut was around 75% before the data.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.