Danske Research discusses the EUR outlook in light of the result of the French elections, and maintains a bearish bias on the EUR in the medium-term.
"As expected the relief rally in EUR proved fairly limited. While option markets had priced in a risk premium on the tail-event of a Le Pen victory other markets had exhibited considerable more certainty of another 5 years in France with Macron at the steering wheel. In our view, the election changes very little for our view on EUR/USD," Danske notes.
"We still favour the downside from fundamental drivers in the likes of relative terms of trade and the Fed's implicit desire to tighten financial conditions. Also in our view, the ECB's ability to strengthen the single currency via rate hikes is doubtful and we think the ECB is fighting valuation forces. Hence, our fundamental preference remains to sell ECB-induced EUR-rallies," Danske adds.