Investing.com — It was hit hard on Monday as winds of political uncertainty quickly emerged on the continent, prompting calls for more pain ahead for the single currency.
“We are committed to our view that EUR/USD will reach 1.05, and remain there, in the second half of 2024,” Macquarie said in a note on Monday, after a shift to the right in the European Parliament elections and a surprise snap election in France, which led to… To the return of political uncertainty in the European Union. To the top of the agenda. Macquarie called for the euro to fall to $1.05 in mid-May.
Ahead of the European Parliament results, Macquarie warned that “the gains made by the populist right will herald new concerns about political stability and EU unity.”
Further fueling the political uncertainty, French President Emmanuel Macron called for early elections, a move widely seen as a major gamble for his party.
Macquarie adds that the upcoming National Assembly elections on June 30 and July 7 could see “the French president’s coalition lose some seats to the National Rally,” while his party “will certainly not become a majority coalition.”
The call for political uncertainty to weigh heavily on the euro has history on its side. In 2017, the United Kingdom's decision to leave the European Union after the 2016 referendum sparked a wave of Euroscepticism, raising concerns about the future of the EU and pushing the euro below parity against the dollar.
“We expect some of the same pressures now as well,” Macquarie warned.
Meanwhile, the strength of the dollar is also likely to keep a lid on the euro, with the Federal Reserve expected to hit a “tight” pause on Wednesday by lowering its interest rate cut expectations to two cuts from three previous cuts this year.
Macquarie added that a hawkish Fed would come at a time when the European Central Bank, Bank of Canada, Swiss central bank and Riksbank have “eased monetary policy, and this could further highlight the Fed's relative 'hawkishness' and therefore favor the US dollar.” “.