The EUR has continued to decline against the USD over the past month. Economists at HSBC expect the EUR/USD pair to extend its slide undermined by the pick-up in political uncertainty ahead of the French elections and the divergence between the European Central Bank (ECB) and the Federal Reserve (Fed).
Main upside risks for the EUR are an improvement in the geopolitical backdrop or additional signs of fiscal policy support
“We look for EUR/USD to move lower over the coming weeks, given the clear disparity in terms of where the ECB is in the cycle compared to the Fed. This does not look set to change anytime soon.”
“The EUR faces political risk in the run-up to the second-round run-off on 24 April of the French presidential election. Any grounds for heightened political uncertainty will likely see the EUR weaker.”
“The main upside risks for the EUR would be an improvement in the geopolitical backdrop or additional signs of fiscal policy support that could allow the ECB to concentrate on bringing down inflation.”
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