EUR: Supported by speculation regarding the outlook for ECB policy and politics - Rabobank

Jane Foley, Senior FX Strategist at Rabobank, explains that speculation regarding the outlook for ECB policy has been a factor behind the short-covering pressures that have lifted the EUR this year. 

Key Quotes

“However, perceived political risk has also been a strong influence on the single currency.  Yesterday’s softness in the EUR may in part have also been a function of concerns about the impact of Brexit on the coherence of the EU and economic activity in the region.  That said, the failure of populist Wilders to secure the right to form a government following the Dutch elections earlier this month and the reduction of perceived political risk in France have both been EUR supportive factors.”

“Opinion polls currently suggest that there is very little chance of far-right candidate Le Pen winning the French Presidency in May.  We would expect confirmation of this to lead to further short-covering in the EUR this spring and we retain our forecast of a move to EUR/USD1.10, EUR/GBP 0.89 by year end.”