Overview
- The euro steadied on Tuesday as unrest in France eased overnight, but gains were capped by a jump in the French-German 10-year spread to about 147 basis points that raised concerns about French sovereign borrowing costs.
- French authorities imposed curfews in several cities and the lower house prepared a vote on the revenue section of the 2027 budget, a political flashpoint that markets see as increasing fiscal uncertainty for France.
- Japan’s auction of 20-year government bonds drew bids 5.84 times the amount offered, the strongest demand since 1987, and that surge in buying pushed the yen higher as investors sought relative safety from European volatility.
- The People’s Bank of China kept rates on hold and the yuan sat near recent stronger levels while resilient UK jobs data lifted the pound and pushed some traders to price in a higher chance of further Bank of England tightening.
- Overall currency moves were modest and mixed as higher oil prices above $111 a barrel and shifting bond flows balanced each other, a pattern that could keep euro volatility elevated and redirect global cash into safer or higher-yielding sovereign debt.