The fall of the euro: threats to the currency amid instability in France

At the beginning of the week, the euro weakened due to increasing political uncertainty in France, which negatively affected the European stock market. At the same time, the dollar strengthened amid expectations of changes in interest rates in the United States. 

Analysts note that two main factors will influence market volatility this month: Trump's position on fiscal measures and possible trade conflicts, as well as the actions of the Federal Reserve System (Fed). If the Fed decides to cut rates and gives soft signals, this could be the start of the so-called Santa Claus rally.

At the same time, the Euro continues to face difficulties, and French stocks are under pressure due to the risk of a government collapse. Prime Minister Michel Barnier must make concessions on the budget in order to avoid a vote of no confidence, which the far-right National Unification party can agree to, unless a «last-minute miracle» happens.

The euro fell 0.61% to $1.0511 after reaching weekly highs, and futures for the French stock index fell 1.4%, foreshadowing a drop in the CAC 40 index. Markets are also closely watching the Fed, as employment reports may influence the decision to cut rates on December 18, and traders estimate the probability of such a decision at about 66%.