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Jun 14 - 10:55 AM

Credit Agricole: EUR Historical Trends Ahead of French Elections

By eFXdata  —  Jun 14 - 09:30 AM

Synopsis:

Credit Agricole highlights the historical impact of political events, particularly the upcoming French elections, on the EUR. With French President Emmanuel Macron calling a snap election, the EUR may face selling pressure, influenced by widening yield spreads and growing political risks.

Key Points:

  1. Upcoming French Elections:

    • French President Emmanuel Macron has called a snap election for June 30 and July 7.
    • The EUR is expected to remain under selling pressure due to the political uncertainty and widening 10Y OAT-Bund yield spread, which has reached its highest level since 2017.
  2. Market Focus on Polls:

    • Market participants will closely monitor polls ahead of the election, anticipating potential shifts in political power.
    • Growing support for the National Rally (RN) or a majority RN-led coalition government could exacerbate EUR headwinds.
  3. Historical Impact of Political Events:

    • Credit Agricole analyzes the EUR's behavior during recent elections in France and Italy, where populist parties made significant gains.
    • The focus is on the French and Italian general elections in June and May 2022, respectively, as well as the formation of the populist Conti government in Italy in May 2018.
  4. EUR Performance:

    • The EUR experienced considerable losses in the run-up to and aftermath of these political events.
    • Historical data suggests that similar trends could be expected ahead of the upcoming French elections.

Conclusion:

Credit Agricole anticipates that the EUR will face continued selling pressure due to political risks associated with the upcoming French elections. Historical trends indicate that the EUR tends to suffer losses in the face of significant political uncertainty and populist gains, suggesting a cautious outlook for the currency in the near term.

Source:
Crédit Agricole Research/Market Commentary

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