EUR: French politics is weighing – ING

FXStreet Insights Team FXStreet

The latest reports suggest President Macron has given the outgoing Prime Minister Sebastien Lecornu until Wednesday evening to try and work with a fractured parliament to find a new prime minister. It is not clear what would happen if Lecornu fails, with the options presumably being a pure technocrat for the job or early elections, ING's FX analyst Chris Turner notes.

Downside risks are building in the absence of fresh US news

"Betting markets currently price a 57% probability that early elections are called by the end of this month. But as our team writes, it's not clear that early elections will solve anything. Expect FX traders to keep one eye on the French: German OAT:Bund spread over the coming weeks and months. A move through 90bp would raise some alarm bells and add to some independent weakness in the euro."

"EUR/USD has been finding support at 1.1650, but it feels like downside risks are building in the absence of fresh news from the US."

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FXStreet Insights Team

FXStreet

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