Investing.com – took a hit on Monday as the winds of political uncertainty quickly resurfaced on the continent, encouraging further calls for further pain for the single currency.
“We maintain our view of EUR/USD reaching 1.05 and sticking there through the second half of 2024,” Macquarie said in a note on Monday, after a rightward shift in the European parliamentary elections and surprise snap elections in France saw the return of political uncertainty in the European Union. top of the agenda. Macquarie called for the euro to fall to $1.05 by mid-May.
Ahead of the European Parliament results, Macquarie had warned that “gains for the populist right would herald new concerns about the political stability and unity of the European Union.”
To add fuel to the burning coals of political uncertainty, French President Emmanuel Macron called early elections, a move widely seen as a big gamble for his Ensemble party.
In the upcoming National Assembly elections on June 30 and July 7, the French president’s coalition “could lose some seats to the RN,” Macquarie added, while his Ensemble party “certainly will not become a majority coalition” .
The call for political uncertainty that will put a heavy burden on the euro has history on its side. In 2017, Britain’s decision to leave the EU following the 2016 referendum sparked a wave of Euroscepticism, raising concerns about the future of the European Union and pushing the euro below parity against the dollar.
“We now expect some of the same pressure,” Macquarie warned.
The dollar’s strength, meanwhile, is also likely to keep the euro in check, as the Fed is expected to take a “hawk-like” pause on Wednesday by downgrading its rate cut outlook to two rate cuts, down from three earlier this year.
An aggressive Fed would come at a time when the ECB, the BoC, the SNB and the Riksbank “have eased monetary policy. It could further emphasize the Fed’s relative ‘hawkishness’ and thus benefit the USD,” he added. Macquarie to it.
