Euro: Political risks but downside bias – ING

Francesco Pesole at ING discusses Euro resilience despite French political developments, including Marine Le Pen’s 2027 bid and expectations of an RN win. He sees limited immediate impact on the Euro, keeps no political premium in EUR forecasts, and highlights a downside bias for EUR/USD, with Swedish inflation and EUR/SEK dynamics also in focus.

France politics and Nordic spillovers

"Marine Le Pen announced she will run in the 2027 presidential election after a court decision yesterday. We discuss the outlook for French politics, rates and FX in this note. This court decision doesn’t change much for the euro considering markets are likely to be already pricing in an RN win in April."

"Surely, there are risks that during the campaign OATs will experience pockets of stress around fiscal concerns, spilling over into the euro. But our baseline assumption is that RN will be careful not to unnerve the bond market before the vote, so we aren’t embedding any political premium in our EUR forecasts for the moment."

"The eurozone data calendar is empty today. There are a few ECB speakers to follow, but with likely limited market impact. Risks remain tilted a bit to the downside for EUR/USD in the near term, with a move below 1.140 still quite possible this week."

"In Sweden, June inflation came in close to consensus. Headline CPIF was 1.3% and CPIF excluding energy was 0.4%. The dampening effect of food VAT cuts remains very visible, but price pressures continue to be quite muted."

"EUR/SEK may linger above 11.00 for longer before starting a gradual decline in late summer and into year-end, primarily due to our call for dovish repricing in the Fed curve."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)