Faced with the threat of a fall of the government, the euro loses 1% against the dollar

Political uncertainty is once again weighing on activity. The euro is sinking this Monday, weighed down by the prospect of a fall of the French government, targeted by a motion of censure after the Prime Minister took responsibility for the criticized Social Security budget. Around 3:10 p.m. GMT (4:10 p.m. in Paris), the European currency fell 1.01% against the greenback, to 1.0470 dollars, and lost 0.21% against the British currency, to 82.87 pence per euro . Prime Minister Michel Barnier triggered article 49.3 on Monday to have the Social Security financing bill (PLFSS) adopted without a vote, leading to the announced filing of a motion of censure by the France Insoumise party. The president of the National Rally (RN) group in the Assembly Marine Le Pen indicated that he would table his own motion of censure, and that his deputies would vote on all the motions, including that of the left.

Mr. Barnier had acceded on Monday to one of the RN's requests on the PLFSS, by committing that there would be no delisting of medicines in 2025, but the far-right party wanted him to also renounces the deindexation of pensions. If the government collapses, “this could lead to budget cuts and other austerity measures that could harm economic growth”explains Kathleen Brooks of XTB. Furthermore, if the RN comes to power following a new election, the analyst doubts that it will be able to reduce the French public deficit, currently above 6% of GDP. “Poor economic data and the prospect of significant rate cuts from the European Central Bank (ECB) next year are also adding to the pressure” on the euro, adds Ms. Brooks.

The dollar also gained 0.85% against the British currency, to 1.2627 dollars per pound, supported by recent statements by Donald Trump on his Truth Social network. The president-elect threatened Saturday to impose customs duties “100%” to the nine BRICS countries, including Brazil, Russia, India, China and South Africa, which are considering creating their own common currency to do without the dollar, currently the reference currency for world trade. “This means that from today, the dominance of the dollar is no longer voluntary, but imposed by the United States”estimates Ulrich Leuchtmann, analyst at Commerzbank. Last week, Donald Trump had already said he wanted to impose customs duties of 25% on products imported from Mexico and Canada. Another factor in the dollar's rise, manufacturing activity in the United States deteriorated again in November, but less than expected, and the outlook is improving for American companies after the uncertainties of the presidential election. .