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Euro slides on political turmoil in France

The euro experienced a significant decline against the US dollar on Monday, falling by 1% to a session low of 1.0462, marking a trajectory for its most substantial daily loss since November 6.

This downward movement comes as the French government faces potential collapse following Prime Minister Michel Barnier’s decision to bypass a parliamentary vote on parts of the budget bill using a constitutional mechanism. The move has sparked considerable political backlash.

The French Prime Minister’s strategy to push through a social security bill without a parliamentary vote has led to opposition parties, including the far-right National Rally and the hard-left France Unbowed, announcing their intentions to vote for a no-confidence motion against Barnier’s government. This collective stance indicates an imminent threat to the government’s stability.

Marine Le Pen, the leader of the National Rally, expressed her party’s discontent and readiness to propose a no-confidence motion, stating that the French public is fed up with the current political situation. Le Pen criticized Barnier’s leadership, suggesting that it had failed to improve conditions in France.

Mathilde Panot from France Unbowed echoed the sentiment of a democratic denial and political chaos under Barnier’s government and President Emmanuel Macron’s tenure. The opposition’s firm stance against the government’s method of passing the bill highlights a tumultuous period in French politics.

The political uncertainty in France has had immediate effects on the euro, as investors react to the possibility of a government collapse. The year-to-date low for the EUR/USD pair stands at 1.0335, which was set on November 22.

The current political events in France are closely watched by markets, as further developments could have additional implications for the currency and the country’s economic outlook.

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