French business confidence defies the turmoil for now
The desk interprets October's unexpected rebound in French business confidence as a potential stabilizing factor for the EUR/USD amid ongoing uncertainty. Despite rising interest rates and mounting social unrest not reflected in the survey, the optimism in industrial orders, particularly from the transport sector, stands in stark contrast to broader estimates. Per the full note , business confidence rose one point to 97, with industry indicators climbing to 105, although concerns around public finances and employment persist. Current FX consensus for EUR/USD targets a median of 1.16 against a spot rate of 1.1253, suggesting a cautious optimism building in the market.
What the desk is arguing
The desk views the recent uptick in business confidence as a necessary buffer against negative externalities facing the French economy and, by extension, the EUR/USD pair. The October survey results show industry confidence rebounding with a notable increase from transport equipment orders, suggesting a level of resilience that may support the euro in the short term. The index still remains below its long-term average, emphasizing that while the rebound is encouraging, it does not signal a full recovery.
Among the most noteworthy data points from the survey, the business confidence index for industry surged to 105, while service sector confidence inched up to 99. However, broader economic uncertainty looms, with the employment climate index dipping to 95, driven by deteriorating hiring intentions in services excluding temp roles. This juxtaposition paints a mixed picture, creating ambiguity for future growth prospects.
Where it sits in our coverage
The current consensus target for EUR/USD stands at 1.16, with a range reflecting potential volatility from 1.12 to 1.20. Notable targets include rabobank at 1.18 for Dec-26, and mizuho at 1.16 for the same period.
Our assessment aligns closely with the consensus, indicating that while traders are cautious, there is positioned optimism about the euro's strength based on upcoming economic indicators and responses to central bank policies. The desk's thesis suggests a slight bullish tilt when considering both the technical and fundamental aspects.
How other firms see it
Market sentiment appears divided; firms like rbc and socgen advocate for a stronger euro near the 1.17 range, while investec and tmgm maintain a more bearish outlook in the 1.14 range for upcoming targets. This diversity highlights a market grappling with both the positive signals from business confidence and the negative pressures from macroeconomic instability.
Related currency pairs to monitor include USD/JPY for insights into risk sentiments and GBP/EUR as a gauge for intra-European economic trajectories that can influence the euro's positioning against the dollar.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01French business confidence rose unexpectedly in October, signaling potential resilience.
- 02Industry indicators saw the most substantial improvement, suggesting international orders are driving sentiment.
- 03Despite positive signs, concerns over public finances and labor market conditions remain pertinent.
- 04Consensus FX targets for EUR/USD expect a cautious upward trend to around 1.16.
Market implications
Traders should monitor the EUR/USD as it hovers near 1.1253, with a key focus on further economic indicators that may shift sentiment toward the anticipated 1.16 target. Additionally, attention to upcoming data releases around employment could serve as a catalyst for volatility.
Risks to this view
A sharp decline in employment figures or further unrest that impacts economic stability could invalidate the current bullish sentiment, potentially driving EUR/USD closer to the lower bounds of trader expectations.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UBS | Bullish | 1.1600 |
ING | Bullish | 1.1300 |
Société Générale | Bearish | 1.1000 |
Articles French business confidence defies the turmoil for now Published 09:28 France Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download October’s unexpected rebound in business confidence is good news, particularly for industry. But the survey does not yet capture the impact of the latest social unrest, while higher interest rates, a weak labour market and deteriorating public finances are clouding the outlook further Charlotte de Montpellier An unexpected improvement Against all expectations, business confidence edged up in October despite the sharp rise in French interest rates since September, gaining one point to reach 97. It therefore remains below its long-term average, but the rebound is a welcome surprise in the current environment.
The main surprise came from industry, where the indicator jumped four points to 105. The increase was largely concentrated in transport equipment and mainly reflected an improvement in order books, particularly foreign orders. The other components also improved, but much more modestly.
In services, the rebound was limited to one point, taking the indicator to 99. This mainly reflected stronger expectations for activity and demand, as well as a marked recovery in administrative and support services. By contrast, confidence deteriorated in retail and construction.
On prices, the survey provides no new inflationary signal. Intentions to raise prices declined in industry and remained stable in both services and construction. The rebound is encouraging, especially after several months of disappointing industrial data.
But it does not fundamentally alter the outlook. The indicator of perceived economic uncertainty rose sharply. In services, it even reached its highest level outside the Covid-19 crisis.
More importantly, the employment climate fell three points to 95, driven by a clear deterioration in hiring intentions in services excluding temporary employment. The signal from the labour market therefore remains firmly negative, which should limit growth in household income and consumption over the coming quarters. Finally, the survey was conducted between late September and early October.
It therefore captures the widening in French spreads, but not the violence and social unrest seen last weekend. October’s rebound is encouraging, but fragile and already partly overtaken by events. Social unrest is already changing the picture Since the October business confidence data was collected, the nature of the risk has changed.
It no longer relates only to weak activity and the impact of higher interest rates, but also to the economic, political and financial consequences of social unrest. The economic cost of the violence is not limited to broken shop windows and looting. As explained here , material damage represents only the most visible part of the bill.
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