Every Rose Has Its Thorn

September 15, 2025

Elias Haddad

France’s fiscal troubles unlikely to knock EUR/USD off its upward path.

China real sector activity was weak in August. CNH ignored the data.

There are no policy relevant economic data release today.

Check-out our Drivers for the Week for a look at what markets are facing this week.

USD is trading on the defensive near recent lows, global stocks are mostly higher, and bond markets are stable. In our view, a dovish Fed policy stance can drag USD lower this week and support risk assets.

EUROZONE

EUR/USD is range-bound above 1.1700. France’s fiscal troubles are unlikely to knock EUR/USD off its upward path. Fitch Ratings downgraded France’s sovereign credit rating on Friday by one notch from “AA-” to “A+” with a stable outlook. According to Fitch, the downgrade was due to “growing political division and polarization” increasing the likelihood of further delays to fiscal consolidation.

Fortunately, France’s fiscal woes remain country-specific and not spreading to the rest of the Eurozone. French bond yield spreads vs. German bunds are widening but Italian, Spanish, and Portuguese bond spreads vs. Germany show no signs of stress.

ECB speakers today include: Executive Board member Isabel Schnabel (12:30pm London, 7:30am New York) and ECB President Christine Lagarde (7:10pm London, 2:10pm New York). ECB signaled last week that it was done easing which bodes well for EUR.

JAPAN

USD/JPY has room to edge down towards the lower-end of its multi-month 140.00-150.00 range. USD/JPY is trading well-above the level implied by US-Japan 2-year bond yield spreads. A dovish Fed funds rate cut can send USD/JPY tumbling on Wednesday.

CHINA

USD/CNH is consolidating around recent cyclical lows near 7.1200. China’s August real sector data was weak. In the first eight months of the year, retail sales growth slowed to 4.6% y/y (consensus: 4.7%) vs. 4.8% in July, industrial production growth eased to 6.2% y/y (consensus: 6.2%) vs. 6.3% in July, and fixed asset investment growth unexpectedly slumped to a five-year low of 0.5% y/y (consensus: 1.5%) vs. 1.6% in July. Excluding real estate development, fixed asset investment growth dropped to 4.2% y/y vs. 5.3% in July.

Regardless, China will continue to lean on infrastructure spending to hit its 5% growth target because of structural constrains blocking a real shift toward consumption. That’s good for commodity prices but bad for China’s long-term economic health.

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