EURUSD to Continue Down After Breaking 1.07 As Macron Fades

EURUSD continues to remain volatile since the NFP news more than a week ago, with a bearish bias that is only strengthening. This pair’s price action has been influenced by a combination of factors, including economic data releases, political events such as the European Parliament elections, which have led to elections in European countries like France, as well as the respective central banks, namely the ECB and the FED.

French President Macron heading out of office

The ECB did lower rates on Thursday last week, however it was widely anticipated so the impact on the Euro was minimal, while they refrained from committing to further interest rate cuts. This was mildly positive for the Euro, but the strong Non-Farm Payrolls on Friday sent the price one cent lower.

The soft US CPI (Consumer Price Index) report this week, sent the price back up to 1.0852 for EUR/USD , but politics are having a bigger impact on the Euro right now, after the advance of right wing parties in the European elections, which have led to snap elections in France. Yesterday ECB members made some remarks but they couldn’t stop this pair from breaking below 1.07, however we saw a slight retrace toward the end of the week, with the price closing above this level.

Recent ECB Remarks and Their Implications:

ECB Policymaker Mario Centeno:

  • Disinflation Process: Centeno anticipates the disinflation process to resume after August.
  • Real Wages: A recovery in real wages is deemed inevitable, suggesting improving purchasing power for consumers.
  • Data-Dependency: Emphasized the importance of remaining data-dependent in policy decisions, indicating that future actions will be guided by incoming economic data.

Comments from ECB President Christine Lagarde:

  • Inflation Target: Lagarde stated that unless there is a major shock, the ECB aims for inflation to hit 2% in the second half of 2025.
  • Mandate on Inflation: When asked about the use of TIPI for France, Lagarde reiterated that it is the ECB’s duty to fulfill its inflation mandate.

Despite discussing disinflation and wage recovery, neither Centeno nor Lagarde provided a clear timeline for when the ECB might resume cutting rates, so July is ruled out for any rate cuts. There is no pre-commitment to a rate cut in September, leaving the decision open and contingent on economic data.

The lack of a clear timeline for additional interest rate cuts and the emphasis on data-dependency could lead to short-term volatility in the EUR/USD pair. But, French president Emmanuel Macron is falling behind in the polls leading to new presidential elections in France which will take place in two weeks.

EUR/USD Chart Daily – MAs Have Turned Into ResistanceChart EURUSD, D1, 2024.06.14 20:25 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

French President Emmanuel Macron has taken a significant political risk by calling an early election. However, Emmanuel Macron’s early election gamble in France has resulted in unexpected political realignments and challenges within his party. The rise of the right and unity among the left wing reflect shifting voter preferences and concerns over economic policies, while his centrist party has fallen to third place.

French Presidential Elections Survey Results:

  • Right (RN): 29.5% support
  • Far-Left (Popular Front): 28.5% support
  • Macron’s Moderate Stance: 18% support

I reckon we will see the Euro falling lower in the next two weeks, but it won’t be straight forward, as right and left wing parties are expected to increase spending and offer some fiscal relaxation after four years of covid lockdowns/restrictions, enormous price hikes and surging interest rates.

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Skerdian Meta
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Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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