The EUR/CAD is ripe for bearish bets, Macquarie said, citing Canada’s steady footing against fresh political chaos in France after Prime Minister François Bayrou’s minority government fell on Monday.
French Prime Minister François Bayrou lost the vote of confidence he unexpectedly called in his government. Members of Parliament voted 364-194 to remove him from office and bring down his minority government.
President Emmanuel Macron now has only three short-term options available, Macquarie strategists said in a recent note, but "none of these may resolve concerns about rising sovereign credit risk"
These options include asking the outgoing prime minister to remain as a caretaker handling day-to-day affairs while Macron considers next steps. This would likely be a temporary fix to manage the 2026 budget that could lead to a technocratic government pending approval from Macron’s left and right allies. Appointing a new prime minister from the populist right or left flanks to attempt coalition-building (with the left more likely); or calling a new legislative election under Article 12.
Unfortunately, these options aren’t likely to provide lasting political solution. France finds herself in political tug of war: Fiscal deficits are estimated at 5.4% of GDP for 2025, but there is entrenched political opposition to budget cuts.
The fallout is expected to fuel significant social unrest over the coming weeks, with large-scale protests and general strikes already planned. The risk of escalating disruption, coupled with mounting concerns about France’s sovereign debt sustainability, creates downward pressure on the euro.
In contrast, Canada shows signs of renewed economic stability. Government initiatives have focused on mitigating the impact of U.S. tariffs, including new strategic response funds and expanded loan programs for key industries such as automotive and agriculture. Ongoing efforts to renegotiate the USMCA trade agreement, meanwhile, may further bolster Canadian economic prospects, the economists said.
Given these divergent trajectories, a tactical short position on EUR/CAD appears favorable, the strategists said, given that spot levels near the top end of a 20-year range around 1.6250.
Source :
https://www.investing.com/news/forex-news/eurusd-poised-for-bearish-bets-as-french-political-chaos-meets-canadian-stability-4229878
