EUR/USD to remain on the defensive amid close results in French election – MUFG

The euro initially staged a brief relief rally at the start of the Asian trading session but it has since given back all of those gains falling back below the 1.09 level. The main driver for EUR volatility has been the release of results from the first round of the French elections. Economists at MUFG Bank expect French election uncertainty to remain a modest weight on the euro.

Euro could weaken further in the near-term if the opinion polls were to continue to narrow 

“The first-round results and the opinion polls pointing towards a close result in the second round will remain a modest weight on the euro in the coming weeks until there is clarity over the outcome of the second round of the election.” 

“There is a risk that the euro could weaken further in the near-term if the opinion polls were to continue to narrow ahead of the second round. However, we remain of the view that President Macron will ultimately prevail albeit much less comfortably than last time around. If we are correct euro weakness on the back of nervousness over the election outcome should prove temporary.”