OPTIONS: Larger FX Option Pipeline

With the initial leg higher provided by the post-ISM USD weakness, EUR/USD is building on gains to hit a new daily high at 1.0544, which also coincides with a firm phase of EUR/GBP strength, with the cross recovering well off the pullback low at 0.8269 to keep the price from any major downside breakout.

• We have noted across the past few weeks a clear area of demand in the cross, layered between 0.8260-87 that coincides with the range-defining support around the 0.8300 handle. Note that this equates to 1.21 in GBP/EUR - a psychological resistance level that often draws attention, and has not been meaningfully broken since 2016 and the year of the Brexit referendum.

Reuters reports that according to its sources, President Emmanuel Macron will aim to name a new prime minister swiftly if the incumbent gov't of PM Michel Barnier falls this evening. According to Reuters, one source says there is a desire to name a new PM ahead of the re-opening ceremony for the Notre Dame Cathedral in Paris, taking place on Saturday 7 December. Given that it took several months to appoint Barnier following the July election, getting a new figure in place in such a short timeframe is likely to prove difficult. 

• The National Assembly is set to take up two motions of censure against the Barnier gov't shortly, once there has been a vote on the end-of-management bill for 2024 (this has been agreed and will avoid any fiscal issues until year-end). Livestream here (in French).
• It would appear that the small chance Barnier had of avoiding ouster - requiring the centre-left Socialist Party (PS) to side with the gov't - has gone. First Secretary Olivier Faure said to Le Monde that he "never refused dialogue" with the PM on passing a budget, but that his party "cannot be asked to approve a project whose injustice we denounce,".
• Several names have been mooted as potential replacements for Barnier. They include Francois Bayrou, leader of the centrist MoDem which sits as part of the pro-Macron Ensemble bloc; Sébastien Lecornu, the Minister of the Armed Forces hailing from Macron's centrist Renaissance; former Socialist Party PM Bernard Cazeneuve; and former Finance Minister Francois Baroin from the conservative Les Republicains.