EUR/USD fell this week amid rising US interest rates and FOMC risks, with near-term support at 1.1585/90, while financial and geopolitical developments in the eurozone – including French budget hurdles and the potential use of frozen Russian assets for Ukraine – remain in focus but are unlikely to undermine the euro’s safe-haven appeal, notes ING FX analyst Chris Turner.
French fiscal challenges and EU plans to use Russian assets keep the euro in check
“EUR/USD has moved slightly as US dollar interest rates increase this week. FOMC risk is negative for EUR/USD. A bearish repricing at the short end of the US curve could lead to a drop back to the 1.1585/90 area. There is also an outside risk at 1.1555/65 in weak end-of-year markets. However, EUR/USD may not stay lower there for long, and we will continue to Bounce favored – likely to reach 1.1800 high – by year end.”
“In eurozone domestic politics, we have seen France pass an important budget for social security. However, the difficulty of getting this done does not bode well for the passage of the 2026 state budget this year, and French fiscal risks will continue to be a drag on the euro in 2026. On a geopolitical level, there is focus this week on EU officials using emergency powers to overpower Hungary and freeze €210 billion in Russian assets, to be used as a compensation loan to Ukraine. European leaders are desperately pushing for this, such as “And that Ukraine should not be pushed into a ceasefire by the United States and the Russians.”
“On this issue, political advisors indicate that a ceasefire agreement is still possible. We mention all this in the context of the euro, since some asset managers are concerned that abuse of equity could undermine the euro’s safe haven status. We have not seen any indication of this in any flow data yet, and as long as the ECB is not tempted to back Ukraine’s loans, we doubt that this development will significantly impact the euro.”
