EUR/USD, EUR/JPY flows - 2027 French Budget and EUR
The French fiscal situation remains key for the EUR swings into next week.
The other big event this week is the start of the 2027 French budget debate, with the 10yr France-Germany government bond spread off the September highs but still very elevated compared to experience over the last 15 years (see chart). End investors will likely be reluctant to buy French government bonds at current spreads until they can be confident that the National Rally will support the 2027 budget and this coming week could see some volatile negotiations. Failure could also trigger older investors to offload some French bonds! Despite optimism in France over the 2027 budget passage, the bond spread will not automatically narrow and movements in the 10yr France-Germany can swing the EUR not only against the USD but also on the crosses.