The euro remained under pressure around $1.148, near its weakest level since late July, as mounting political uncertainty in Germany and renewed concerns over France’s public finances weighed on market sentiment. In Germany, the governing CDU recorded its worst-ever result in a state election in Mecklenburg-Western Pomerania, failing to secure a single seat. The setback prompted calls from within the party for Chancellor Friedrich Merz to resign after just 16 months in office. In Berlin, where Merz’s CDU has led the city-state government since 2023, the party also underperformed, trailing the Left party, which won 25.7% of the vote. These developments followed an earlier shock to the political establishment when the CDU lost to the anti-immigration AfD in Saxony-Anhalt two weeks ago.
At the same time, France’s fiscal outlook is facing intensifying scrutiny. Rating agency Scope downgraded the country, while Morningstar DBRS revised its outlook on French sovereign debt to negative. The moves add to a growing series of warnings over the sustainability of France’s public finances ahead of next year’s presidential election.
