EUR: Probability of RN winning majority continues to fade – MUFG

The Euro (EUR) has been holding on to gains against the US dollar at the start of this month, MUFG analysts note.

EUR to continue its volatile wobbling

“After hitting a low of 1.0666 towards the end of last month, EUR/USD initially jumped to a high of 1.0776 on Monday after the release of results from the first round of the French elections triggered a relief rally for EUR, the pair has since fallen back towards the 1.0700-level and recovered back to 1.0800.“

“The market impact has once again been more evident in the government bond market where the yield spread between the 10-year French and German government bonds has narrowed to around 71bps from a high of 82bps towards the end of last month.”

“The easing of the first risk premium priced into French government bonds that had reached the highest levels seen the euro-zone debt crisis back between 2011 and 2012 reflects building investor optimism that the far-right RN party will fall short of winning a majority in parliament.”