France’s pending credit-rating decision and the European Central Bank’s next policy meeting are near-term tests for the euro, which Commerzbank analyst Antje Praefcke expects to remain relatively stable, FXStreet reported Oct. 21.
Agence France Trésor, France’s debt agency, lists the country’s Moody’s rating at Aa3 with a negative outlook. Its calendar schedules the next rating decision for Oct. 23. The previous decision was April 10.
Praefcke said markets no longer priced an ECB rate increase in October. Instead, they expected an increase in December and slightly more than one additional rise by mid-2027, according to her comments carried by FXStreet. Those expectations are market pricing, not an ECB commitment.
The ECB decided on Sept. 10 to raise each of its three key rates by 25 basis points, effective Sept. 16. Its deposit rate rose to 2.50%, its main refinancing rate to 2.65% and its marginal lending rate to 2.90%. The central bank said it would base future decisions on incoming data, meeting by meeting.
Praefcke said a cautious message from the ECB could lead markets to scale back expectations for further increases and put pressure on the euro. She said French political and rating concerns were largely reflected in the currency.
Praefcke also warned of a brief euro decline if protests worsened and curfews proved ineffective, FXStreet reported. The City of Paris said the police prefecture renewed a curfew for the night of Oct. 21–22 in Place de la République and the Halles area. Residents, workers in the affected areas and emergency services were exempt.
Praefcke expects eurozone purchasing managers’ index readings to remain stable on Oct. 23, FXStreet reported. Moody’s scheduled rating decision falls on the same date. The ECB meets Oct. 28–29, with a news conference scheduled for Oct. 29.
