The Euro traded in a subdued range Wednesday, waffling around 1.05 levels.
The EURUSD pair was last at 1.0492, as political uncertainties may continue to drag on the European currency.
“France’s minority government faces a real risk of falling apart after far-right and left-wing parties submitted no-confidence motions,” said OCBC’s FX analysts Frances Cheung and Christopher Wong.
Debate is expected to start at 4pm local time and the voting will commence shortly thereafter.
A no-confidence motion requires more than half of the lower house votes (i.e. 288 votes) to succeed. No single party or bloc has sufficient votes to pass a no-confidence motion on its own.
In the event of a successful no-confidence vote, PM Barnier and cabinet will likely have to resign and the government goes into caretaker mode (to be appointed by President Macron).
No legislative elections can be held until one year after the last elections that was held in July. In the interim, Macron will need to appoint a new prime minister.
The OBCB analysts added that political uncertainties did not stop at France.
In Germany, Chancellor Scholz is expected to call for a vote of confidence on December 11 and the Bundestag will vote on December 16.
To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on February 23, 2025.
The far right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections.
“Political uncertainties may continue to drag on the Euro. But given the bout of uncertainties so far, the EUR has also refused to test much lower,” said OCBC’s Cheung and Wong.
“Price action suggests that short EUR trades may be at stretched levels. A flush out of stale EUR shorts cannot be ruled out and that can come of any upside data surprise out of Europe or downside surprise in US data.
“Daily momentum is mild bullish while RSI is flat. Sideways trade likely. Support at 1.0450 levels before 1.0330. Resistance at 1.0570 (21 DMA), 1.0610 and 1.0670 (38.2% fibo retracement of October high to November low).”
(Source: OANDA)
