Both the Euro and European stocks outperformed their US counterparts yesterday.
OAT/Bund spreads showed some calm yesterday, with the spread falling by 4 basis points from 0.76% to 0.72%. With the early French elections approaching on Sunday, markets have already priced in a fair amount of risk premium on the financial side.
Arguably, the potential negative impact from a hung parliament (assuming Macron does not step down) or a far-right majority win may already be reflected in the spread and implied volatility across EUR pairs.
It is also worth noting that this week is the end of the month, the end of the quarter, and the end of the half year, so we may also see some rebalancing flows in the mix, which will have nothing to do with the macro risks or the specific risks that exist at the moment.
Euro performance