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Euro faces pressure as France debt-sustainability concerns spread

Commerzbank highlights that the ECB could face a mandate clash between price stability and financial stability if it is forced to intervene.

Reported · Written up by our desk · Major Pairs

Commerzbank’s Thu Lan Nguyen said expanding concerns about France’s public debt sustainability are starting to weigh on the euro, a shift from when the common currency was largely unaffected by bond market turmoil.

The analyst noted that, because the European Central Bank sits at the center of the transmission mechanism, worsening debt worries raise the risk that policymakers could face a dilemma between preserving price stability and safeguarding financial stability.

Commerzbank added that the euro coming under pressure suggests markets are seeing a higher probability that the ECB may need to intervene, while also pointing to growing doubts about the effectiveness of available tools.

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