EUR/USD: Today was NFP day!

The EUR/USD continued its stabilisation around $1.19 yesterday, as rather lackluster macroeconomic news from France offset a slightly more positive sentiment from Germany, the Eurozone's largest economy.

In the fourth quarter, the unemployment rate in France climbed to 8% of the active population, its highest level since 2020. "This deterioration in the unemployment rate reflects the sharp weaknesses of the French productive fabric. 2025 was marked by a further increase in business failures and a negative balance between factory closures and openings, illustrating a struggling reindustrialization. The gap between closures and the creation of industrial sites has widened since the autumn in a context of increased political instability," comment economists at Asteres.

"However, businesses need visibility and stability to commit to investments and revive hiring. The recently adopted budget could provide a clearer framework, a necessary condition to avoid a more pronounced deterioration of the labor market in the coming quarters. But political instability alone is not enough to explain the difficulties facing industry. Chinese competition is intensifying, particularly in key sectors for Europe such as automotive, batteries, and chemicals. It relies on significantly lower production costs, strong integration of value chains, especially access to rare earth elements, substantial public support, and a weak currency. In a situation of overcapacity, Chinese production exceeds domestic demand and floods European markets, where it rapidly gains market share, weakening local manufacturers."

Germany, for its part, seems poised to turn things around. The very positive surprise of the Sentix Eurozone investor confidence index, published on Monday and exceeding expectations, is largely due to the German component. This corroborates other very recent, rather encouraging economic statistics for Germany, and in particular the ZEW economic confidence index, which rose from 45.9 to 59.7.

Swiss Life AM economists provide context: "The outlook will largely depend on fiscal expansion, the implementation, speed, and effectiveness of which remain uncertain. Spending from the special budget increased significantly in 2025 and is expected to continue rising in 2026. Furthermore, the differences between actual and projected spending reflect a mixed picture."

"In transport infrastructure, existing resources were quickly committed because projects were already in place and maintenance was a priority. However, in more complex sectors (energy infrastructure, research, and digitalisation), commitments were significantly lower than anticipated, indicating higher requirements in terms of design, permits, and coordination. The budgetary impetus for these structurally important investments therefore largely depends on their execution. The key here is not the deficit trajectory, but efficient and coordinated execution to quickly fill order books and kickstart production."

Against the backdrop, the balance of power is not in favour of the dollar, and not only against the euro. "President Trump's assertive geopolitical strategies and persistent questions about the Fed's independence are prompting investors to diversify their non-dollar allocations," summarises Alexander Gauthy, Senior Cross-Assets Manager / Market Forex Strategist at Indosuez WM. "It's worth noting that nearly a third of the flows into US equities since April are now hedged against dollar risk, illustrating the growing caution of international investors."

Right now the EUR/USD is trading at $1.1865.

KEY TECHNICAL ELEMENTS
The triangle consolidation pattern of 28 and 29 January has been invalidated, and our long positions on the EUR/USD are suspended. Our outlook is neutral pending further technical signals.