Europe Summary and Highlights 5 Oct
The EUR has stabilised in European trading, but the tone still remains negative.
Europe
The substantive widening of the French-Germany government bond spreads has caused jitters around France and the Euro. This is not ease to fix with major fiscal consolidation unable to pass in the National Assembly for the minority government and global investors having close to Eur1trn of French government bonds. While last week EUR/USD was in focus, traders are feel that EUR/JPY will lead the way this week. The U.S. employment report has tempered the USD rise and U.S. Treasury yields could move lower.
Other currency moves against the USD have been more controlled in Europe, though with a slight USD corrective tone. U.S. money markets are now discounting only a small probability of an October hike and any further weak data could raise questions about the 25bps expected in December.