Euro: Rebound against US Dollar constrained by Fitch move – ING

Fitch’s unscheduled revision of France’s sovereign outlook to negative could put pressure on French bonds and the Euro (EUR), according to ING’s Chris Turner. In his view, the move and concerns over France’s public finances should constrain gains in EUR/USD even as energy prices soften. He anticipates greater selling interest around 1.1200–1.1250 and expects EUR/CHF to remain under pressure towards recent lows.

Euro pairs face pressure following Fitch's negative outlook

"Unwelcome news for French politicians late Friday came in the form of an unscheduled ratings review from Fitch. It shifted its outlook on French sovereign debt from stable to negative and promised another ratings review by the end of February."

"Reasons for the outlook shift are familiar by now, but they centre on the government's failure to improve public finances at a time of weak growth."

"Let's see whether this unscheduled move puts much pressure on the OAT-Bund spread today. We would think that the news limits the potential for EUR/USD to rebound on softer energy prices."

"We suspect there will be more EUR/USD sellers in the 1.1200/1250 area should it make it that far."

"The news should also keep EUR/CHF pressured towards Friday's lows at 0.9180/85."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Find out more.)