The euro is down slightly on Thursday and remains under pressure. EUR/USD hasn’t posted a winning session in the month of April and fell to 1.0874 yesterday, which was a one-month low. In the European session, EUR/USD is trading at 1.0880.
Euro nervously eyes French election
The euro has been under pressure on a number of fronts. The Ukraine-Russia war has triggered massive sanctions against Russia, with the threat of additional sanctions in response to Russian atrocities against Ukrainian civilians. With a huge amount of trade conducted between Russia and Western Europe, sanctions will hurt both sides.
As well, the Fed is planning to tighten at a faster rate, which has boosted US yields and the US dollar. Just to add to the mix, France holds a the first round of the presidential election on Sunday, and the extreme right-wing candidate Marine Le Pen is expected to do well. Le Pen is a euro-sceptic and recent polls show that she is only a few points behind President Macron. The two candidates are expected to square off in the second round, and the prospect of Le Pen winning will likely weigh on the struggling euro.
The currency markets are calm today, as the FOMC minutes essentially confirmed the hawkish comments of Fed member Brainard a day earlier. The minutes signalled that the Fed plans to scale back the balance sheet at a faster pace than previously expected, cutting USD 95 billion/month starting in September. As well, the minutes hinted that the Fed could implement super-size 1/2 point hikes in the coming months, in order to curb red-hot inflation. The Fed has been telegraphing the markets that 1/2 point increases are on the table, in order to minimize market volatility. Still, the sheer size of such hikes would likely provide a boost to the US dollar.
EUR/USD Technical
- EUR/USD tested resistance at 1.0936 on Wednesday. Above, there is resistance at 1.1060
- There are support levels at 1.0820 and 1.0696
