Tim Riddell, Research Analyst at Westpac, suggests that the EUR/USD has formed a solid base, although this may be retested on any election shock, EUR is seen as a buy-on-dips for rebounds into mid-range.
“French elections will be the key focus for into next week. A persistent 30% of voters remain undecided means that this is definitely an open four-horse race. The faltering of far-left Melenchon’s rise appears to have settled some concerns and OAT-bund spreads have narrowed and EUR/USD has firmed.”
“Volatility could be high and markets are vulnerable to either an EU/EUR positive Macron/Fillon 2 nd ballot, or an EU negative stronger showing for Le Pen.”
“The low level of core CPI (confirmed at 0.7%) and recent ECB members stating that their policy bias is balanced and neutral suggest that next week’s meeting will leave policy unchanged, especially given election risks and the 29th April EU (ex-UK) Brexit summit.”