EUR: Guided by the politics - Westpac

In view of Tim Riddell, Research Analyst at Westpac, consistent polling for a Macron win in a face-off with Le Pen is market and EUR supportive.

Key Quotes

“However, as noted last week, the high level of undecided voters (30%) means that there are equally high risks of a shock. Beware the polls.”

“Any perceptions of acrimony (post triggering Article 50) in negotiations may see pullbacks in heady EU surveys.”

“ECB warned markets this week that they were over-pricing potential for an early shift in policy. The US-EU 10yr yield spread led the turn in EUR/USD and has widened further. This suggests that EUR/USD peaked as it tested the middle of its broader 1.04-1.16 range.”

“Firmer Swiss surveys are likely to put a bid in CHF, but SNB has restated its intent to counter any strengthening.”

“Both yield spreads and EUR/USD look set to trade back towards the lower end of recent ranges.”