Euro US Dollar Exchange Rate Climbs Following French Election
The Euro US Dollar (EUR/USD) exchange rate is rising today as French President Emmanuel Macron gains a strong lead in the first round of the French Presidential election.
At the time of writing, the EUR/USD exchange rate is trading at around $1.0901, roughly up 0.2% from today’s opening levels.
Euro (EUR) Strengthens on First Round of French Election
The Euro (EUR) is climbing against the US Dollar (USD) today following the results of the first round of the French election.
Emmanuel Macron has received 27.6% of the vote thus far, with 97% of results correlated at present.
Despite this, Macron has warned his supporters that ‘nothing is decided’.
This comes as opponent, Marine Le Pen, looks set to face Macron in the second round after receiving 23.41% of the vote. EUR investors are wary of a Le Pen victory due to her far right and anti-European Union position.
‘Make no mistake. This contest is not finished and the debate we’ll have in the next two weeks will be decisive for our country and for Europe […] I want a France rooted in a strong Europe.’
On the other hand, the Ukraine crisis continues to weigh on EUR.
Russia is reportedly preparing for a large-scale offensive in eastern Ukraine within the coming days.
According to Ukraine President, Volodymyr Zelenskiy, ‘Russian troops will move to even larger operations in the east’ and has warned this week may be ‘tense’.
Despite this, Zelenskiy has stated Ukraine is ‘preparing’ and will ‘respond’ to Russian advances.
How Ukraine intends to respond, and the potential economic fallout across Europe in response, is yet to be seen, and is limiting demand for EUR today.
US Dollar (USD) Stumbles as US Treasury Reaches 3-Yeah High
The US Dollar (USD) is slipping against the Euro (EUR) as US treasury yields rise to their highest level in three years.
Today, ten-year yield increased to 2.75% as USD investors bet on the Federal Reserve to tighten monetary policy aggressively in the coming weeks.
According to March’s Federal Open Market Committee (FOMC) meeting, the Fed is aiming to reduce asset purchases by up to $95bn per month.
This comes amid suggestions the Fed is lagging behind some of its peers when it comes to tackling inflation.
Last week, Eric Winograd, an economist at AllianceBernstein, said:
‘The Fed has clearly recognised at this point that they are behind the curve.
‘When you’re behind the curve you have to hurry to catch up. They are now hurrying […] They were increasing the size of the balance sheet four weeks ago. And now four weeks from now they are going to be reducing it.’
On the other hand, geopolitical uncertainty is underpinning risk-off sentiment, buoying the appeal of the safe-haven ‘Greenback’.
Euro US Dollar Forecast: Will Russia-Ukraine War Escalate Further?
Looking ahead, Russia’s invasion of Ukraine is likely to continue dominating market sentiment, weighing on the Euro US Dollar exchange rate.
Should peace talks remain at an impasse, it may drive investors away from EUR and towards the safe haven USD.
On the data front, the Euro may be further pressurised by Germany’s ZEW economic sentiment index: the index is expected to reveal sentiment continued to deteriorate this month.
Meanwhile, the US Dollar may be bolstered by a high inflation reading.
US inflation is predicted to increase from 7.9% to 8.5% during March. If the market forecasts are met, it may further support interest rate hike bets.
Furthermore, the US producer price index is expected to increase from 0.8% to 1.1%, providing additional support for the ‘Greenback’.