Investing.com – The blow was dealt on Monday as winds of political uncertainty quickly re-emerged across the continent, encouraging further calls for more pain for the single currency.
“We maintain our view that EUR/USD will reach 1.05 and remain there in the second half of 2024,” Macquarie said in a note on Monday after a shift to the right in European Parliament elections and a surprise snap election in France led to renewed political uncertainty in the European Union. to the top of the agenda. Macquarie called for the euro to fall to $1.05 in mid-May.
Ahead of the European Parliament results, Macquarie warned that “the successes of right-wing populists will herald new concerns about the political stability and unity of the European Union.”
Adding fuel to the burning embers of political uncertainty, French President Emmanuel Macron announced early elections, a move widely seen as a major 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 PH,” Macquarie adds, while his Ensemble party “certainly will not be a majority coalition.”
The euro has history on its side. In 2017, the UK’s decision to leave the EU following the 2016 referendum sparked a wave of Euroscepticism, raising fears about the future of the European Union and pushing the euro below parity against the dollar.
“We expect the same pressure now,” Macquarie warned.
Meanwhile, a stronger dollar is also likely to keep a lid on the euro, with the Fed expected to take a hawkish pause on Wednesday, cutting its rate cut forecast to two cuts from three earlier this year.
A hawkish Fed comes at a time when the ECB, Bank of Canada, SNB and Riksbank “ease monetary policy, which could further highlight the Fed’s relative hawkishness and thus support the dollar,” Macquarie added.