The EUR/USD pair has appreciated to approximately 1.1215 during the early Asian trading session on Tuesday. France has instituted partial curfews across multiple cities, encompassing certain areas of Paris. Fed’s Warsh enhances market anticipations regarding a rate hold in October. The EUR/USD pair maintains a favourable position close to 1.1215 in the early European session on Tuesday. However, the potential upside for the pair may be constrained as violent protests in France contribute to apprehensions regarding the nation’s deteriorating fiscal outlook. The German Zew Survey and US ADP employment reports are scheduled for release later on Tuesday. On Monday, the source reported that French authorities have enacted overnight curfews in certain areas of central Paris and other cities following a weekend characterised by riots and looting throughout the nation. French Prime Minister Sébastien Lecornu stated on Monday that he is “fully resolved to restore public order” and has called for “local and partial” curfews if necessary. He stated that there was “no question” of imposing a full curfew on entire cities. This action offers minimal backing to the common currency.
Market participants will pay keen attention to the evolving landscape of France’s fiscal and political uncertainties. Any signs of escalation could serve as a headwind for the major pair. The spread between French government bonds and safe-haven German Bunds has widened to 147 basis points, reaching levels not seen since the 2011–2012 European debt crisis, up from approximately 110 basis points in late September. Across the pond, Fed Chair Kevin Warsh last week expressed optimism about US economic strength but did not indicate whether or when more hikes would be needed. Traders in Fed funds futures anticipate that the Federal Reserve will maintain its current interest rates during the October policy meeting. They are assigning an 82.8% likelihood to a potential rate increase in December, as indicated by the CME FedWatch tool. Strategists highlight that the Euro is lagging its peers, noting that “the EUR is underperforming following widespread and violent protests across France against poor conditions in schools and hospitals and broader concerns about affordability.” They add that the political backdrop is feeding through to local markets, with “French stocks and bonds underperforming and bond spreads versus Germany have widened to 145bps, sitting at the top of the (recent) historic range.” Geopolitical tensions are compounding the cautious tone after “President Zelenskyy said the US is pushing Ukraine, not Russia to concede, adding to geopolitical concerns,” reinforcing a more challenging environment for the EUR complex.
Fed Chair Warsh’s speech scores 5.6 out of 10 on the FXS Speechtracker, which is modestly softer compared to the historical average of 6.1 out of 10. This indicates a cautious tone, even though there are upbeat references to structural growth and an investment surge. The observation regarding being “over-scarred from the global financial crisis” emphasises an enduring risk-averse sentiment. Meanwhile, Warsh points to the robustness of policy-driven investments and refrains from making premature judgements about the forthcoming October and December meetings. This approach keeps Dollar traders attentive to data-dependent results and the possibility of “crystalizing” decisions as the year progresses. Warsh’s focus on AI as a demand-side force, along with his attention to tail-risk management, introduces a forward-looking perspective on financial stability that mitigates any immediate hawkish interpretation. The FXS Fed Sentiment Index remained stable, registering no change at a high level of 127.51. This indicates that the speech maintains the overarching policy narrative in a hawkish stance, even with the marginally lower FXS Speechtracker score.
In the FX markets, the interplay of a robust FXS Fed Sentiment Index alongside a non-committal tone indicates that the Dollar is supported by anticipations of sustained attention to inflation and financial stability, despite the absence of clear direction regarding the 2026 meetings. In the daily chart, EUR/USD maintains a bearish near-term bias as the spot remains below the 100-day simple moving average and the 20-period middle band of the Bollinger Bands. The pair is also constrained by the upper Bollinger band, while the Relative Strength Index at 38 indicates weak yet stabilising downside momentum following its exit from oversold territory. On the topside, initial resistance is observed at the Bollinger middle band near 1.1260, followed by the upper band around 1.1410 and the 100-day SMA at 1.1462. On the downside, the lower Bollinger band at 1.1110 presents the next significant support level. A breach of this level would pave the way for a more pronounced decline, whereas maintaining a position above it would sustain the pair within a consolidative phase amid the prevailing bearish framework.
