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Jun 24 - 02:55 PM

ING: Potential for Increased Risk Premium in EUR/USD Ahead of French Elections

By eFXdata  —  Jun 24 - 01:30 PM


ING highlights the potential for more risk premium build-up in EUR/USD as political uncertainty looms ahead of the French parliamentary elections. Marine Le Pen’s far-right RN party is leading in the polls, which is contributing to a cautious outlook for the euro.

Key Points:

  1. Polls and Political Uncertainty:

    • Marine Le Pen’s far-right RN party leads with 35% in latest polls.
    • The left-wing NPF party follows with 29%, and President Macron’s centrist coalition holds 19%.
    • Political uncertainty is likely to persist, affecting euro sentiment.
  2. Risk Premium in EUR/USD:

    • As of Friday’s close, the EUR/USD risk premium was estimated at 0.9%.
    • This is below the 2.4% peak on 14 June and the 1.8% historical benchmark identified by ING.
  3. Bond Market Indicators:

    • The 10-year OAT-Bund spread widened to a new peak of 82bp on Friday.
    • Further pressure on French bonds is expected as the vote approaches.
  4. Market Sentiment:

    • ING sees risks skewed to the downside for EUR/USD before the weekend’s political events in the US and the EU.
    • Political developments in France are likely to keep a lid on the euro in the near term.


ING anticipates more risk premium build-up in EUR/USD ahead of the French parliamentary elections. The leading position of Marine Le Pen’s far-right party and the resulting political uncertainty are expected to weigh on the euro, with potential further pressure on French bonds and downside risks for EUR/USD leading into the weekend’s events.

ING Research/Market Commentary


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