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The darkest moment in the euro zone!市场做空欧元,押注历史性崩盘
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Hello everyone, today XM Forex will bring you "【XM Group】: The darkest moment in the euro zone! The market shorts the euro and bets on a historic collapse." Hope it will be helpful to you! The original content is as follows:
The French political and economic crisis continues to escalate, not only reflecting the problem of domestic political fragmentation in France, but also may cause regional risks due to the French economy accounting for more than 20% of the euro zone. Investors are paying close attention to the voting results, which will become an important catalyst for affecting the euro trend and euro zone stability.
The French political crisis continues to ferment, and the debt quagmire may follow Italy
Political turmoil intensifies fiscal difficulties
France is facing an increasingly severe political and fiscal crisis. Prime Minister François Belu will face a vote of confidence on September 8 to implement a $51 billion austerity plan. If it fails, he will become the fourth prime minister to step down within a year and a half, highlighting that France has fallen into a political deadlock and a vicious cycle of debt.
France was once the cornerstone of European political stability, but now parliament is divided into multiple factions: the left opposes cuts of social welfare (65% of public spending), the centrists demand increased military spending without taxes, and the far-right advocates www.xmniubi.compressing spending by restricting immigration and reducing EU spending.这种分裂使任何财政改革举步维艰。
The blockage of reform and the backlash of the market
The tax reduction policy introduced by Macron in 2017 (abolition of wealth tax, housing tax, and reduction of corporate tax) attracted foreign capital and reduced the unemployment rate to a lowest level of 7% in decades, but it caused tax losses of 62 billion euros (2.2% of GDP) each year. The cost reduction of unsupplied public services, coupled with the epidemic, energy crisis and social protests (such as "yellow vests"), has caused debt to soar from 2.2 trillion to 3.3 trillion euros.
Although Macron successfully raised his retirement age to 64 (it is expected to save 1 in 20307.7 billion euros), but the process is full of protests and political games. The deficit rate reached 5.5% in 2023 (exceeding government forecast), and S&P downgraded France's rating. The yield on 10-year French bonds has surpassed Greece and tied with Italy, reflecting the intensification of market concerns.
Beiru's austerity plan includes the cancellation of two statutory holidays to boost economic output, but was criticized by the far right as "attacking French history and people." If the vote fails, Macron will face the difficult choice of forming a new government or early elections. In contrast to Italy, Italian Prime Minister Meloni is expected to become one of the longest-term leaders after the war in the past three years, while France is trapped in the quagmire of frequent changes.
The fragmentation of France's political and debt crisis are intertwining, recreating the dilemma that southern European countries have experienced. The September 8 vote will determine whether the country can avoid a www.xmniubi.comprehensive fiscal storm.
The French political crisis drags down the euro, and the debt vortex has caused market concerns
As French Prime Minister Beiru faces a vote of confidence in parliament on September 8, political uncertainty continues to ferment. Analysts point out that the turmoil in France is becoming a new risk point that affects the euro's trend.
This political crisis stems from France's worsening fiscal situation. The country's debt scale has reached 3.3 trillion euros, and the budget deficit accounts for 5.4% of GDP this year. If the 44 billion euro austerity plan proposed by Prime Minister Beiru, if failed to pass, France will become the main euro zone economy to change its government for the fourth time in a year and a half, a prospect that has worried investors.
UBS FX strategist said: "The market is repricing France's risks, with the 10-year French Treasury yield breaking through 3.2% recently, and the spread with Italian Treasury bonds narrowing to less than 50 basis points, indicating that investors' confidence in the second largest economy in the euro zone is shaking."
The euro trend has reacted significantly to this. Over the past week, the euro has fallen by 1.5% against the dollar and 0.8% against the pound. Options market data show that investors are increasing their short positions in the euro, and the risk reversal indicator has risen to a bearish 1.5 percentage points in the week.
France's current dilemma is more systemic risky than Italy. After Italy's debt crisis reform in the 2010s, political stability has increased, and Prime Minister Meloni's government is expected to become one of the longest-term governments after the war. The French parliament has fallen into a fragmented pattern since last year's election, and any fiscal reform faces fierce game between the left, the far right and the middle factions.
Deutsche Bank macro analysts pointed out that "the French issue is more worrying because its economy accounts for more than 20% of the euro zone. If the French debt problem continues to worsen, it may trigger repricing of the entire euro zone bond market."
Party participants are closely watching the ECB's reaction. Although central bank officials said they have not considered an emergency bond purchase plan, sources revealed that policymakers have mentioned France's risk exposure in internal discussions.
Technical Analysis
EuropeThe meta-technical aspect shows that if it breaks through the August high of 1.1742, it is possible to further reach the July high of 1.1829; if it falls below the key support level of the 50-day simple moving average (SMA) (1.1664), it may further fall to the recent low of 1.1573.
Investors recommend keeping a close eye on the results of the September 8 vote of confidence and the possible subsequent political restructuring, which could become an important catalyst for the next move of the euro.
The above content is all about "【XM Group】: The darkest moment in the euro zone! The market shorts the euro and bets on a historic collapse". It was carefully www.xmniubi.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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