UBS kept its long-term target for the exchange rate at 1.0500, following the French parliamentary elections, citing weakness in the far-right National Rally party and a strong showing by President Emmanuel Macron’s centrist party.
Despite the uncertainty surrounding the formation and composition of the new French government, UBS highlighted that an immediate conflict between France and the European Union appears unlikely.
The election result appears to have reduced the likelihood of near-term volatility in the euro, which some FX market participants had anticipated. The absence of any potential conflict with the European Union following the French election has also tempered expectations of immediate turmoil in the euro.
UBS analysis suggests that while the French parliamentary election results were not a worst-case scenario for the euro, they did not particularly boost the currency’s outlook. The bank’s stance suggests that despite political developments, there are still fundamental challenges that could weigh on the EUR/USD price.
The ECB’s steady target reflects a view that the French election results did not significantly change the trajectory of the euro versus the dollar.
EUR/USD outlook remains at 1.0500 as UBS assesses broader implications of election results on currency markets.
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