Investing.com – The stock has fallen significantly in recent weeks, mainly hit by the shock of the dissolution of the National Assembly in France and the resulting political uncertainty.
In a note published on Tuesday, Citi analysts emphasized that the EUR/USD response was more important than they initially expected and proposed three scenarios for the outcome of the snap parliamentary elections to be held on June 30 and July 7.
For each scenario, they gave two targets for the EUR/USD: one if President Macron steps down, and the other if he remains in power.
The first scenario envisions a centrist coalition or a government led by the National Rally, but which would find itself in a situation that would lead to the abandonment of most of its economic projects. They consider this scenario to be the most bullish for the EUR/USD and in this case predict a rise to 1.0810 for the currency pair and if Macron remains president. If he steps down, Citi’s proposed EUR/USD target is 1.0710.
In the second scenario, Citi imagines a deadlocked parliament or a National Rally-led government that would try to deliver on some of its promises. For this scenario, Citi analysts predict EUR/USD at 1.0730 if Macron stays, and 1.0570 if he steps down.
Finally, the last scenario described by Citi takes into account a government led by the National Rally or the New Ecological and Social People’s Union, which would try to implement as many measures as possible from its program. According to them, this scenario would lead to a EUR/USD of 1.0570 if Macron remains, and of 1.0410 if the president resigns.
Thus, Citi estimates that the downside risks of an unfavorable outcome outweigh the upside risks of a positive outcome, making the Euro-Dollar currently an unattractive currency pair from a risk-reward perspective.
