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EURUSD per month
MUFG Bank discusses the potential impact of the French elections and June non-farm payrolls on EUR/USD. It focuses on the risk premium that has already been priced into EUR/USD and how the election results could influence further moves.
the main points:
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the current situation:
- Stability: The EUR/USD pair settled around the 1.0700 level after initially falling by double digits following the announcement of early elections in France.
- Risk premium: MUFG Bank estimates that the current risk premium is 1.0% in the EUR/USD pair.
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First round of elections:
- Impact of results: The first round of the French election on Sunday will provide a clearer picture of support for right- and left-wing parties.
- Possible results:
- Strong performance by RN and NPF: If right-wing parties such as the National Rally (RN) and left-wing parties such as the New Popular Front (NPF) perform strongly, EUR/USD could approach 1.0500.
- Surprise from the moderates: If the centrist parties or the Republicans perform better than expected, this could narrow the gap and result in modest gains for the euro.
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Print next week’s Nonfarm Payrolls report:
- Economic data: June Nonfarm Payrolls data will also be a key event to watch, which could add to EUR/USD volatility depending on the results.
Conclusion:
Mitsubishi UFJ Bank confirms that the French elections and June non-farm payrolls data will be decisive events for the EUR/USD pair. A strong performance by the RN and NPF parties may push EUR/USD towards 1.0500, while better-than-expected results by the centrists may support modest gains for the euro. The current risk premium of 1.0% suggests that markets are already pricing in some degree of political risk, but the actual election results are likely to dictate the direction of the EUR/USD pair next week.
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