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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
The ongoing civil unrest in France poses a significant risk to the country's fragile economic landscape, characterized by sluggish growth and rising budgetary pressures. Per the full note , initial projections indicate that the unrest could impact growth as material damages and lost business activity accumulate, with estimates running as high as €1.2 billion in insured losses, representing approximately 0.04% of France's nominal GDP. Given these developments, traders should align their expectations with the broader economic implications, especially considering the uncertainty surrounding how long these disruptions may last and the potential for wider economic fallout.
The desk frames this as a critical juncture for the French economy, with current unrest amplifying already precarious conditions. Immediate financial impacts, coupled with the uncertainty of a prolonged state of unrest, could further erode consumer and investor confidence, threatening economic recovery.
Supporting evidence from local estimates suggests that over 2,000 businesses have suffered directly since mid-October, with the resultant economic cost already stacking up, reminiscent of the impacts seen during the Yellow Vest protests which also inflicted heavy financial damage on the retail and hospitality sectors.
JPMorgan has set a EUR/USD target of 1.10, while BofA holds a contrasting view at 1.04 for March 2026, illustrating a divergence in sentiment regarding the currency's trajectory amidst these local challenges.
This viewpoint aligns largely with the market consensus, leaning towards the middle of the anticipated range but leaves room for shifts based on how economic conditions evolve in response to the unrest.
Many firms, including Goldman Sachs and Deutsche Bank, share a cautious outlook given the potential for economic disruptions, while Nomura offers a more optimistic forecast, suggesting resilience despite the unrest.
Watch EUR/USD closely as it could be affected by broader market reactions to France's economic stability, particularly in light of central bank communications related to rate policies amid rising tensions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Focus on EUR/USD positioning as the unrest continues, specifically watching levels around 1.075, which could be critical as market sentiment evolves. The upcoming economic data releases from France will also be pivotal in shaping perceptions of risk.
Risks to this view
A swift resolution to the unrest or stronger-than-expected economic data could quickly invalidate the current bearish outlook, prompting a reassessment of growth projections and possibly lifting EUR/USD beyond consensus forecasts. Additionally, further international support or stimulus measures could mitigate the unrest's economic impact.
Articles France’s unrest adds to an already toxic economic mix Published 14:27 France Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Violence and disruption have already caused significant damage, but the ultimate hit to growth will depend on how long the unrest lasts and whether it causes a broader loss of confidence. For France, the timing could hardly have been worse Charlotte de Montpellier France remains in a difficult position with weak growth, budgetary concerns and higher interest rates all weighing on economic activity Since 17 October, France has experienced a wave of violence, looting and property damage, with images of the unrest circulating widely around the world. Initially driven by protests involving secondary school and university students, the movement quickly gathered broader demands around purchasing power, public services and the cost of living.
From material damage to lost activity Initial estimates already point to significant material damage. As of 20 October, France’s network of chambers of commerce estimated that more than 2,000 businesses had been directly affected since 17 October, with the provisional bill running into several hundred million euros. For comparison, the urban unrest of summer 2023 cost insurers more than €790 million, compared with €256 million for the entire Yellow Vest movement.
An initial estimate from Morningstar puts the insured cost of the current unrest of at most €1.2 billion, equivalent to around 0.04% of French nominal GDP. These figures remain highly preliminary. Insured losses are also only the visible part of the economic cost.
The Cazeneuve-Lescure parliamentary report on the 2018 Yellow Vest movement estimated turnover losses of around €2 billion for shopping centres and close to €850 million for hotels, cafés and restaurants, compared with €217 million paid out by insurers for property damage. Indirect costs arising from closures, lower footfall and permanently lost sales therefore far exceeded the insured damage. Even this broader economic bill should not be treated as an equivalent loss of GDP.
GDP measures a flow of production, whereas the destruction of buildings, vehicles, shop windows and inventories is primarily a loss of wealth. Repairs generate activity that is recorded in GDP, although this does not make the destruction economically beneficial: resources are being used simply to restore what existed before. The impact on GDP, therefore, depends mainly on how much economic activity is permanently lost.
For the Yellow Vest movement in autumn 2018, the French statistics office, INSEE, estimated that blockades, closures and disruption to retail, hotels, restaurants and transport may have reduced fourth-quarter 2018 GDP growth by around 0.1 percentage point. Some purchases of goods could be postponed and made later, but this was far less true for services such as a restaurant meal, a hotel night or a cancelled journey. As another point of reference, the strikes of December 1995 reduced quarterly GDP growth by an estimated 0.2 percentage point.
The protests against the pension reform in 2023 provide a more recent illustration of the potential for a rebound. According to the Banque de France , the social unrest of March and April 2023 reduced first-quarter 2023 GDP growth by around 0.1 percentage point. The subsequent recovery in production, particularly in refining and energy, then added around 0.1 percentage point to second-quarter 2023 growth.
In that case, the initial negative impact was fully offset in the following quarter. The bigger risk runs through confidence While short-lived disruption can be recovered, a lasting loss of confidence can have a bigger impact. Images of violence can deter households from visiting city centres, encourage tourists to postpone their trips and lead businesses to delay investment.
An International Monetary Fund study covering 836 episodes of social unrest in 89 countries between 1990 and 2019 found that, following a standard increase in social unrest, GDP remained on average 0.2% below its baseline six quarters later. For larger episodes, the gap reached around 1% after six quarters. The economic impact of the events that began on 17 October will therefore depend less on the value of the damage already recorded than on whether the disruption continues.
If it remains brief and geographically concentrated, the macroeconomic effect may be limited even if the losses for individual businesses are considerable. Repeated unrest, precautionary closures, disruption to transport and logistics, and a broader fall in confidence would make it much less likely that the lost activity is subsequently recovered. Further protests have already been called for 24 and 31 October, while a broader national day of strikes and demonstrations backed by several major unions is scheduled for 5 November.
This increases the risk that the economic disruption will extend beyond a one-off shock. The initial market reaction suggests that the confidence channel is already at work. The spread between ten-year French and German government bonds widened from 137 basis points on Friday to 153 basis points on 20 October, while French equities fell.
The violence is clearly not the only factor behind these moves. Budgetary and political concerns were already weighing heavily on French assets. But the unrest adds another layer of uncertainty and reinforces the perception that any future government will find it difficult to deliver the reforms and savings required.
This further tightening in financial conditions will weigh on activity itself. Persistently higher interest rates gradually raise financing costs for the government, businesses and households. They discourage productive and residential investment and reinforce wait-and-see behaviour.
The economic shock therefore no longer comes only through closed shops and lost days of activity. It also works through a higher cost of capital and weaker confidence. Weak growth and a widening political constraint These events further darken an economic outlook that was already unfavourable.
We had expected French GDP growth of just 0.3% in 2026 and 0.6% in 2027. If the unrest continues, confidence deteriorates further or market tensions intensify, growth could be even weaker. The situation also complicates an already very difficult fiscal equation.
France’s public deficit is expected to reach 5.4% of GDP in 2026. The government aims to bring it down to 5% in 2027, compared with around 6.5% in the absence of new measures. Yet the 5% target is based on GDP growth of 0.5% in 2026 and 1.0% in 2027, a very optimistic and unlikely scenario.
This means that even full implementation of the draft budget will probably not be enough to deliver the targeted deficit reduction, as weaker growth would generate less tax revenue than the government assumes. The draft budget also faces difficult parliamentary negotiations, and the current unrest makes the adjustment being asked of the population even harder to accept politically. The government has almost no room to respond to the protests through additional spending or tax cuts.
Yet without concessions, it may also struggle to restore calm. Any attempt to ease the tensions through measures that further weaken the public finances could, in turn, increase investor concerns and push French borrowing costs higher. All in all, France has neither the fiscal room to buy social peace nor the political room to impose adjustment easily.
France is therefore caught in a particularly difficult circle. Weak growth worsens the fiscal position, budgetary concerns push interest rates higher, and tighter financial conditions weigh further on activity. At the same time, social unrest reduces the political capacity to implement the adjustments required.
The combination of weak growth, strained public finances and political instability is likely to keep both the French economy and French markets under pressure in the coming months. Strikes Public finances GDP France Eurozone Deficit Confidence Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Charlotte de Montpellier Senior Economist, France and Switzerland Charlotte de Montpellier is a Senior Economist in ING Belgium covering France and Switzerland. She joined us in February 2018. Prior to this, she worked as a research and teaching assistant at… In this article From material damage to lost activity The bigger risk runs through confidence Weak growth and a widening political constraint
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