Euro Steady Above $1.26 With Battle Over French Budget On The Horizon

The euro traded steadily at $1.2659 at 7:00 GMT, weighed down by more poor economic data from the region.

The common currency has been under pressure as recent figures have indicated that the region’s economy is falling off the path to recovery and may be headed for a recession.

On Tuesday, factory output data showed a decline while Germany’s ZEW investor sentiment survey disappointed. Germany, the eurozone’s largest economy, is seen as heading for a recession as the nation’s economic data of late has been uncharacteristically weak.

Tuesday’s ZEW survey showed that sentiment had fallen below zero to minus 3.6 in October, far below estimates of a 0.8 reading and September’s 6.9. 

A separate report showed that the eurozone’s factory production had fallen 1.8 percent from July to August and 1.9 percent annually. The figure showed a sharper than expected decline and suggests that eurozone output likely fell in the third quarter.

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Meanwhile, a battle between France and the EU is looking more and more likely as the nation’s Finance Minister has said that its 2015 budget reflects the largest spending cuts that France is prepared to make.

The current budget does not fall in line with EU mandates, which has caused some contention as several other struggling eurozone nations were forced to endure painful austerity measures in order to meet the bloc’s deficit guidelines.

The Wall Street Journal reported that Fitch Ratings has put France’s sovereign rating on negative watch, indicating that a downgrade is possible. On Friday, Standard & Poor’s Ratings Services made a similar move as most see the financial situation in France continuing to worsen.