Euro Moves rose in European trade on Monday against a basket of major rivals, moving into a positive zone for the first time in three days against the US dollar. This movement comes as the Euro attempts to distance itself from recent six-week lows.
Investor Sentiment and Market Movements
Despite the uptick, investors remain cautious, anticipating that the common currency could face downward pressure due to the ongoing uncertainty surrounding the French elections and the rise of far-right political movements across Europe.
The Price
The EUR/USD pair increased by 0.2%, reaching $1.0715, with a session-low at $1.0680. On Friday, the pair lost 0.1%, trading near six-week lows at $1.0668 after disappointing European services and manufacturing data. The Euro also recorded a 0.1% loss last week against the dollar, marking the third consecutive weekly decline amidst geopolitical tensions in Europe.
French Politics
Markets are closely monitoring the upcoming French elections. The far right appears poised to challenge French President Emmanuel Macron’s centrist party in parliament. A victory for the far right or far left could exacerbate France’s government debt situation, which is already at concerning levels. The German-French 10-year government bond yield gap has widened as investors flee French bonds due to worries about rising debts and political instability.
Euro Outlook
Analysts from City Index predict that the Euro will likely face further declines in the short term, driven by political concerns over the success of far-right movements in France and broader Europe. They expect the EUR/USD pair to fall below $1.07 once more.
Conclusion
While the Euro is currently experiencing a brief respite, the underlying factors point towards a potential bearish outlook. Political uncertainties, particularly in France, coupled with broader geopolitical tensions, suggest that investors should brace for possible volatility in the Euro’s value in the near future.
FAQs
- Why did the Euro rise against the US dollar? The Euro rose due to market corrections and a temporary shift in investor sentiment. However, underlying political uncertainties may lead to future declines.
- What impact do the French elections have on the Euro? The French elections could significantly impact the Euro, especially if the far right gains more influence, leading to increased political and economic uncertainty.
- Why is the EUR/USD pair significant? The EUR/USD pair is a major indicator of the relative strength of the Euro against the US dollar, influencing global trade and investment decisions.
- What are the main concerns for investors regarding the Euro? Investors are primarily concerned about political instability in Europe, rising government debts, and the success of far-right political movements.
- What is the outlook for the Euro in the coming weeks? Analysts expect the Euro Moves to face downward pressure due to ongoing political uncertainties and economic challenges within Europe.