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Currency exchange rates following the French elections: euro still anaemic, close to lows against the franc and the dollar (daily analysis 11.04.2022)

11 Apr 2022 9:08|Bartosz Sawicki

President Emmanuel Macron achieved the best result in the first round of the French presidential election, with Eurosceptic Marine Le Pen coming in second. The euro's initial positive reaction against the dollar and franc did not last even until the start of Monday's European session. The EUR/USD quickly returned below 1.09, while the EUR/CHF is under 1.02. Polls indicate equal chances for both candidates, which should fuel uncertainty, nervousness and push capital away from the single currency. The second round is scheduled for April 24.

Euro exchange rate under pressure from French policy and sanctions on Russia; source: Conotoxia

Market calendar: minor chances for euro to return to favour, the pound may gain favour

The global markets will focus on the European Central Bank meeting. However, despite the record 7.5% inflation, it should not bring a change in the attitude of the monetary authorities and clearly support the common currency: given the ongoing war in Ukraine and the unclosed catalogue of sanctions against Russia, the scale of uncertainty about the path of the economy is too significant for this.

In the case of the euro, polls ahead of the second round of the French presidential election may prove more significant. In turn, data on price pressures and retail sales in the US economy should confirm its continued growth and reinforce the belief that the Fed will raise interest rates by 100bp this quarter. This is nothing new, but with a weak euro, the advantages remain with the dollar.

What may improve the perception of the pound sterling are a number of readings from the UK, with the report on the condition of the labour market and inflation indexes at the forefront. According to Conotoxia currency forecasts, it is one of the main currencies with the greatest potential. The last interest rate hike was accompanied by overly soft rhetoric. Signals from the economy should eventually result in a change of strategy by the monetary authorities and force them to raise the cost of money further. Given that the valuation of the Bank of England's intentions has been heavily revised, the pound is likely to benefit strongly against the main currencies.

11 Apr 2022 9:08|Bartosz Sawicki

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

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