MUFG Research discusses the EUR outlook in light of the result of the French elections, and maintains a bearish bias on the EUR in the near-term.
"The EUR briefly bucked the broader USD strengthening trend overnight with EUR/USD rising to an intra-day high of 1.0851 following the announcement that President Macron was set to win the second round of the French election. However, those initial gains have quickly been reversed with EUR/USD haven since fallen back below the 1.0800- level. The price action likely reflects two factors: i) market participants had not moved to price in much negative political risk premium for the French election, and ii) downside risks to growth in Europe from the ongoing conflict in Ukraine and further COVID disruption Europe are set to continue even after the favourable French election result," MUFG notes.
"The election results suggest the President is in a relatively strong position although he will probably need to form alliances with other parties. For the EUR, the favourable French election result is clearly not sufficient on its own to turn the current bearish trend," MUFG adds.