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French elections weighing on the euro

Friday 8 April, 2022

Daily Currency Update

Market participants are inundated with risk events, digesting the prospect of tighter monetary policy, the ramifications of more sanctions on Russia, the potential French political turmoil and COVID-19 concerns in China. This week the US Federal Reserve signalled that it was preparing to act more quickly than previously guided to contain rampant inflation, and yesterday policymakers at the European Central Bank confirmed in the accounts of their March meeting that they are looking to unwind stimulus. The United Nations General Assembly suspended Russia from the UN human rights council after Russian troops were accused of committing atrocities against Ukrainian civilians, a move that joins the US removing its trade status with Russia and the European Union agreeing to ban coal imports. The first round of French presidential elections are this weekend and leader Marine Le Pen is very close to succeed in the opinion polls and lastly China’s COVID-19 outbreak appears to be worsening, with new case numbers topping 21,000 yesterday.

All these headlines have supported a stronger US dollar, as investors buy safe-haven currencies like the dollar in times of global turmoil. GBP/USD has touched 1.3030 at the lows this morning, and EUR/USD reached 1.0850. Europe’s need for Russian energy and political concerns in France have supported a weaker EUR, which have both supported GBP/EUR reaching 1.2035 overnight.

Key Movers

Europe had a big week for domestic data with further Russian sanctions, and the ECB accounts show members now want to unwind stimulus, but the week isn’t over with many eyes now turning to this weekend's first round of presidential elections in France. Emmanuel Macron is currently being challenged by Marine Le Pen in the early opinion polls and as Le Pen has previously voiced interest in France leaving Europe and the euro, the outcome of Sunday will likely add further volatility to the euro ahead of next week.

At the end of March, GBP/EUR was as low as 1.1750 and EUR/USD was up at 1.1175. Over the past week and a half, sterling looks to be finding some stability above 1.2000 and EUR/USD is back below 1.0900.

Expected Ranges

  • GBP/USD: 1.2990 - 1.3120 ▼
  • GBP/EUR: 1.1970 - 1.2050 ▲
  • GBP/AUD: 1.7420 - 1.7510 ▲
  • EUR/USD: 1.0820 - 1.0930 ▼