Investing.com – Bearish sentiment towards the euro has returned, according to Bank of America Securities, in the wake of the European Parliament elections and rising political risks.
At 08:25 ET (12:25 GMT), it was trading 0.3% lower at $1.0730, with the pair down more than a full percentage point over the past week.
The European Parliament elections, which concluded last weekend, witnessed sharp movements to the right in a number of countries, most notably in France.
This prompted French President Emmanuel Macron to call for surprise legislative elections on Monday, a move that amounts to a roll of the dice on his political future, and potentially hands significant political power to Marine Le Pen's far-right party.
Rating agency Moody's (NYSE:) issued a credit warning after the event.
“These early elections increase risks to financial consolidation,” Moody's said in a statement late Monday, describing it as “credit negative” for the country's Aa2 rating.
The EUR/USD pair appears to be breaking above the 1.09 level and escaping the year-to-date downtrend just last week, analysts at BoA Securities said in a June 10 note.
However, political turmoil in the European Union (combined with strong jobs numbers in the US) brought EUR/USD back to the 1.07 level to start this week.
“Against the backdrop of these catalysts, bearish sentiment is now expanding to include several euro pairs. Event analysis shows a bearish continuation signal for EUR/USD, as euro divergence widened sharply by 4% over the weekend,” the Bank of America said.
“Positioning analysis shows broad bearish trend signals for the Euro against the British Pound, the Japanese Yen and the Swedish Krona.”
