EUR: French politics to drag – ING
|As expected, French PM Francois Bayrou lost his vote of confidence in parliament yesterday and has tendered his resignation, ING's FX analyst Chris Turner notes.
EUR/USD may stall in the 1.1790/1800 area temporarily
"The question now is whether the discordant political parties decide to agree on the 'what' (how to reach an agreement on the budget) before agreeing on 'who' to lead the government. None of this can be seen as good news for the euro, and no doubt there will be episodic underperformance of French government bonds as investors speculate whether President Macron will be forced to call early elections."
"EUR/USD, however, is doing fine. The drop in short-dated US rates has brought dollar hedging costs for euro area-based investors in US assets down to 2.12% per annum – the lowest since early April. This should encourage fixed-income investors in particular to raise their dollar hedge ratios and pressure the spot dollar exchange rate. It's just that our US money market story above discourages us from pushing for a big move through the 1.1830 high just yet."
"The eurozone calendar is quiet today, but we do hear from a couple of ECB speakers: Joachim Nagel and Francois Villeroy de Galhau, both of whom are at a BIS Innovation Summit. Commentary on ECB policy looks unlikely so close to Thursday's ECB rate meeting. EUR/USD may stall in the 1.1790/1800 area temporarily. But 1.20 is undoubtedly the multi-month target."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.