Euro’s Bullish Momentum Shows Cracks as French Risks Resurface

The euro is showing early signs of strain, with investors paring upside exposure as political uncertainty spikes in France.

The currency is trading below $1.17 and heading for a second consecutive daily drop. It fell to its lowest in more than a week on Monday after French Prime Minister Sébastien Lecornu unexpectedly resigned, deepening a national political crisis. A commonly watched options gauge of directional bias has turned bearish after a bullish run, suggesting traders are positioning for further losses.

Flows point the same way. Depository Trust & Clearing Corporation data now indicate the largest tilt toward bearish exposure in a month.

That contrasts with the last major flare—up of political risk in France. On Sept. 8, after then–Prime Minister François Bayrou lost a confidence vote, euro sentiment held up: the currency rose about 0.4% on the day and options positioning leaned bullish, with roughly a 60–40 split in notional favoring upside exposure, DTCC figures show.

One factor in the shift is a thinner set of US catalysts during the government shutdown, which gives euro-centric headlines greater sway. It may also be the case that a bigger change is brewing as the share of bullish notional slipped for four straight weeks from about 60% to below 55%, signaling a gradual loss of momentum.

Longer-dated options sentiment still leans to the topside, but at the narrowest premium since early August, while the euro has stalled near a long-term resistance area, and short-term signals now tilt to the downside.