Euro Options Show Bullish Outlook Intact Amid French Turbulence

Currency options show robust appetite for the euro and suggest the common currency is managing to dodge the fallout from political turmoil in France once again.

Contracts that pay out if the euro climbs had one of their strongest sessions this month on Tuesday, data from the Depository Trust & Clearing Corporation showed. French assets, meanwhile, were under pressure amid speculation a confidence vote .

The resilience signals traders are treating the turbulence as a domestic story rather than a concern that could spill over into the broader euro area. That was the case , when sharp losses in French stocks and widening yield spreads versus Germany saw only muted swings in the currency market.

Gauges of positioning and sentiment are leaning the same way.

The spread between one-month and one-week risk reversals remains positive, underscoring how near-term caution is offset by a bullish outlook into year-end. Longer-tenor bets — as seen through the so-called volatility skew — reinforce that picture.

In the spot currency market, dollar moves have largely dictated the euro’s path — rather than concern over French politics and the budget.

The euro climbed 0.2% on Tuesday versus the dollar as concern about threats to the independence of the Federal Reserve weakened the US currency. In Wednesday’s session, the euro fell to a three-week low as month-end flows helped the greenback recover, according to Europe-based traders.