Investing.com – The euro has fallen significantly in recent weeks, particularly affected by the shock of the dissolution of the National Assembly in France and the resulting political uncertainty.
In a note published on Tuesday, Citi analysts highlighted that the reaction of the EUR/USD pair was more significant than they initially expected and proposed three scenarios for the results of the early legislative elections scheduled for June 30 and July 7.
For each scenario, they provided two targets for the EUR/USD pair: the first if President Macron resigns, and the second if he remains in power.
Scenario 1: Either a centrist coalition or a government led by the National Rally is formed, but it finds itself in a position that leads to abandoning most of its economic projects. They consider this scenario the most optimistic for the EUR/USD pair, expecting it to rise to 1.0810 for the pair in this case and if Macron remains president. If he resigns, Citi’s suggested target for the EUR/USD pair is 1.0710.
In the second scenario, Citibank imagines a parliament that has reached a dead end, or a government led by the National Rally Party that seeks to implement some of its promises. For this scenario, Citi analysts expect EUR/USD to reach 1.0730 if Macron stays, and at 1.0570 if he resigns.
Finally, the last scenario described by Seti takes into account a government led by the National Rally or the new Union Popular Ecological and Social, which will seek to implement as many measures as possible from its programme. In their opinion, this scenario would lead to 1.0570 if Macron stays, and 1.0410 if the president resigns.
Thus, Citi estimates that the downside risk in the event of an unfavorable outcome is greater than the upside risk in the event of a positive outcome, making the EUR/USD a currently unattractive currency pair from a risk-reward ratio perspective.
