Euro to US Dollar Monthly
MUFG discusses the potential impact of the French elections and June’s non-farm payrolls report on EUR/USD. The focus is on the risk premium already 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 stabilized around the 1.0700 level after initially falling by two large figures 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 currency pair.
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First round of elections:
- Effect of results: The first round of French elections on Sunday will provide a clearer picture of support for right-wing and left-wing parties.
- Possible outcomes:
- 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 centrist parties or Republicans perform better than expected, this could narrow the gap and generate modest gains for the euro.
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Print next week’s Nonfarm Payrolls report:
- Economic data: The June Non-Farm Payrolls (NFP) report will also be a key event to watch, which could increase EUR/USD volatility depending on the results.
Conclusion:
MUFG highlights that the French elections and June’s non-farm payrolls will be key events for EUR/USD. Strong RN and NPF could push EUR/USD towards 1.0500, while better-than-expected results from the two central banks could support modest gains for the euro. The current 1.0% risk premium suggests that markets are already pricing in some degree of political risk, but the actual election results are likely to determine the direction of EUR/USD in the coming week.
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