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Jun 10 - 02:55 PM

SocGen: EUR/USD Outlook Ahead of French Elections

By eFXdata  —  Jun 10 - 01:30 PM


SocGen analyzes the potential impact of the upcoming French elections on the EUR/USD exchange rate. The announcement by President Macron to dissolve Parliament and call for fresh elections following the strong performance of far-right parties has already affected bond spreads. The analysis suggests further volatility in EUR/USD depending on the election outcomes.

Key Points:

  1. Historical Context of Bond Spreads:

    • Between 2010 and the height of the European sovereign crisis in 2011, the OAT-Bund spread widened significantly from under 20bp to almost 2%.
    • Italian spreads increased from under 1% to over 5%, prompting Mario Draghi's intervention.
  2. Current Spread Movements:

    • OAT spreads have been in the range of 40-70bp for the last three years.
    • President Macron's decision to dissolve Parliament and call for new elections has led to a spread movement from 45bp to 55bp, which is not yet at crisis levels.
  3. Potential Election Impact:

    • The far-right Rassemblement National party's potential to win a majority in Parliament could trigger further market reactions.
    • A win for Rassemblement National would likely cause EUR/USD to re-test and possibly break the 1.06 level reached in mid-April.
    • The first-round election results are due on June 30, with the second round concluding on July 7, post the next US jobs report.


The upcoming French elections introduce significant uncertainty to the EUR/USD exchange rate. While the current movements in bond spreads are not yet at crisis levels, a majority win for the far-right Rassemblement National party could lead to a substantial depreciation of the euro against the dollar

Société Générale Research/Market Commentary


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