🇫🇷Euro/Franc Stabilizes As OAT Spreads Pullback: Cable FX Macro

• Earlier in the week, a Swiss franc bid pushed the EUR/CHF rate below 0.9300, likely due to the franc's safe haven status following the unexpected resignation of the French PM. The chart below illustrates EUR/CHF (inverted) tracking the OAT-Bund 10y benchmark spread (white). The increase in the yield spread indicates the market's selling of French debt, as the country faces the highest budget deficit in the euro area.

• At the time of writing, the yield spread has narrowed most of the initial move to 85bps. Positive news emerged with Macro seeking a new PM, which would essentially avoid new elections and potentially expedite the budget process. Analysts have identified January as a potential risk period for a French government shutdown if budget negotiations fail.