Euro Gains as French Political Instability Stabilizes,bitcoin jumps past $100,000
The euro strengthened on Thursday as French government bonds stabilized following the collapse of France's government, despite Bitcoin surging to a record above $100,000. Investors responded positively to the nomination of a pro-cryptocurrency leader to head the U.S. Securities and Exchange Commission.The gap between French and German 10-year bond yields narrowed to 76.9 basis points, marking the smallest difference since November 22, which provided support to the euro.
However, despite the day's gains, the euro was still on track to register a weekly loss, marking its fourth decline in the last five weeks.
French President Emmanuel Macron met with allies and parliamentary leaders on Thursday in an effort to quickly appoint a new prime minister after Michel Barnier resigned following a vote by opposition lawmakers to oust his government.
Amo Sahota, executive director at FX consulting firm Klarity FX, commented, "The market is weighing the financial implications of the French government's collapse. The consensus seems to be that it won't have as significant an impact on spending plans as initially feared, which is helping to support the euro."
He added, "This situation echoes the political instability Greece faced, which had a major impact on the eurozone. Now, with two large economies—France and Germany—dealing with political turmoil, analysts are growing more concerned about the euro and have already downgraded their projections."
Germany, too, has been mired in political turmoil following the collapse of Chancellor Olaf Scholz's coalition last month and ongoing disputes over government spending.
The euro gained 0.6% to $1.0567, moving further away from the two-year low of $1.0332 reached at the end of November, as traders anticipated a prolonged adjustment period for France.
From a technical perspective, Shaun Osborne, Chief FX Strategist at Scotiabank in Toronto, noted that the positive price movement on Wednesday, followed by moderate gains in the low $1.05s on Thursday, has provided "the euro a chance to extend higher and test key resistance levels, with a potential bullish trigger at $1.0590."
Traders are nearly unanimous in expecting the European Central Bank to cut interest rates next week, with market expectations pricing in around 157 basis points of easing by the end of 2025.
Meanwhile, Bitcoin has seen significant growth since November, driven by anticipation that Donald Trump's potential U.S. presidential victory could bring a favorable regulatory environment for cryptocurrencies. The cryptocurrency surged to a record high of $103,649 during Asian trading hours, fueled by President-elect Trump's nomination of pro-crypto Paul Atkins to head the SEC. It was last up 1.3% at $99,147, marking a year-to-date gain of over 130%.
Arnoud Star Busmann, CEO of Quantoz Payments, a Netherlands-based payments technology company, wrote, "With a more favorable U.S. regulatory environment and the rise of next-generation stablecoins driving adoption in Europe, we believe Bitcoin and the broader crypto market could continue to thrive.
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