- EUR/USD falls on Monday as the French government faces a possible no-confidence vote.
- The US dollar strengthens due to Donald Trump’s threat to impose 100% tariffs on the BRICS countries.
- Dovish comments from the ECB’s Martin Kazaks add to the negative sentiment around the Euro.
EUR/USD is trading more than half a percentage point lower on Monday, with a single Euro (EUR) buying around 1.0500 US Dollars (USD) as New York wakes up to the sound of alarm clocks and the aroma of coffee.
The pair is falling as a political crisis threatens to topple the French government, weighing on the Euro as President-elect Donald Trump gives the Dollar a boost by threatening to impose tariffs on BRICS nations unless they abandon their quest for a alternative to the dollar.
The Single Currency is depreciating as France faces a political crisis of a severity not seen since 1962. Michel Barnier’s minority government could face a vote of no confidence as it tries to pass a controversial Budget in parliament.
Due to the lack of an absolute majority, Barnier depends on the support of the French far-right National Rally party (RN), but they have demanded significant concessions to the Budget, limiting the austerity of the original plan that sought to control government spending and reduce the deficit relatively large part of the country.
Barnier has until Monday to give in to the RN’s demands or face the possibility of a no-confidence motion to topple his government.
The panic is leading international investors to avoid European stocks, reducing demand for the Euro, according to Reuters. This, in turn, is weighing on EUR/USD.
Meanwhile, the US dollar is rising across the board after Donald Trump threatened the BRICS trading bloc with 100% tariffs unless it abandons the search for a replacement currency.
BRICS – which includes Brazil, Russia, India, China, South Africa, Egypt, Iran, the United Arab Emirates and Ethiopia – has been steadily reducing its dependence on the USD as a medium of exchange, using its members’ currencies instead, while considers an alternative reserve currency of its own.
“The idea that the BRICS countries are trying to get away from the Dollar while we stand by and watch is OVER,” Trump posted on Truth Social on Saturday afternoon. “We require a commitment from these countries that they will not create a new BRICS Currency, support any other Currency to replace the powerful US Dollar, or face 100% tariffs, and should expect to say goodbye to selling into the wonderful US economy. “he added.
EUR/USD faces further downward pressure after comments from European Central Bank governing council member Martins Kazaks on Monday suggesting he was in favor of further cuts to euro zone interest rates .
“In my opinion, the rate cuts should continue,” Kazaks said, adding, “we see that the inflation problem will soon end.”
The expectation of lower interest rates is negative for the Euro as it reduces foreign capital flows.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
