The Euro gained support after positive political news from France. The EUR/USD currency pair may find strong support at 1.160 under certain conditions. France’s Prime Minister, Sébastien Lecornu, has postponed pension reforms following a request from the Socialist Party.

Political Support from the Socialist Party

With the Socialist Party’s support, the chances of a successful no-confidence vote have decreased. This backing increases the likelihood of passing a budget, even though parliamentary numbers are close. The proposed budget aims to lower the deficit from 5.4% to 4.7% this year. However, the pension freeze might shake market confidence regarding long-term fiscal plans. Currently, the 10-year OAT-Bund spread is below 80 basis points, its narrowest gap in a month, making the euro seem less risky. If Lecornu survives the no-confidence vote, we could see the EUR/USD rise and establish solid support around 1.160.

Market Reaction to Political Stability

After Prime Minister Lecornu survived the no-confidence vote this morning, political risks have eased, boosting the Euro. The EUR/USD is stabilizing around the 1.1600 level, which may develop into a strong support base soon. This stability is a relief after the uncertainty of late September 2025. The decreased political tension is visible in the bond market, with the 10-year OAT-Bund spread now at 77 basis points—the tightest in over a month. This trend is also reflected in the derivatives market, where one-month implied volatility for EUR/USD has dropped to 7.8%, down from over 9.5% last week. This signals that the market anticipates a calmer period ahead, making options cheaper. Currently, the situation feels much more stable than the political turmoil affecting French markets back in 2022, indicating that a systemic threat is unlikely. However, it’s important to note that Eurozone’s September 2025 flash CPI data slightly exceeded expectations at 2.8%, indicating that the European Central Bank still has work to do. So, while French politics are stable for now, monetary policy will remain a crucial factor. With the new support level and declining volatility, strategies that benefit from the Euro holding steady seem attractive. Selling EUR/USD puts with strike prices below 1.1550 could allow for premium collection while suggesting that the worst is behind us. For those expecting a gradual increase, creating bull call spreads could provide a defined-risk approach to preparing for a modest rally toward 1.1700. Create your live VT Markets account and start trading now.

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