The crisis in France is dragging down the euro, globally and in the local market - to 3.40 shekels

The political crisis in France, amid severe unrest and fears of political paralysis that would prevent the implementation of a budget cuts plan for 2027, is dragging down the euro against the dollar and the shekel. The euro is trading around 3.40 shekels, after a 1% decline against the shekel. The dollar is strengthening against a basket of currencies, against the backdrop of a weak employment report in the US that increased expectations for the interest rate to remain unchanged in October.

The political crisis in France, manifested in severe unrest, is dragging down the euro against the dollar and the shekel. The main concern is political paralysis that would prevent the government from implementing a budget cuts plan for 2027 worth 54 billion euros, leaving the local debt crisis unresolved. The euro fell 0.7% against the dollar and is trading below $1.12, and in the local market it is losing 1% against the shekel and trading around 3.40 shekels, following a similar drop on Friday. The dollar, on the other hand, is strengthening: the dollar index is up 0.5% to 102.5 points, and the dollar is trading slightly above 3.04 shekels. In the background of trading, the weak employment report published in the US on Friday, according to which only 29,000 jobs were added in September (compared to an expectation of 84,000) and the unemployment rate rose to 4.2%. Following the report, investors are pricing in a 78% probability that the Fed will leave interest rates unchanged at its upcoming meeting on October 28, compared to 36% a week ago. However, they still expect interest rate hikes later. Strategists note that the dollar is the main beneficiary in the current environment, against the backdrop of rising US bond yields and a wave of selling in global bond markets.