Concerns over French politics are refusing to go away. Simultaneously, heightened fears of supply issues resulting from lockdown fears in China have compounded support for the safe-haven USD. Therefore, the EUR/USD pair is unlikely to enjoy substantial gains in the near-term, economists at Rabobank report.

Slower growing Chinese economy and a rapid pace of Fed tightening support the greenback

“A fractured French electorate and concerns about energy security in Europe continue to cloud the outlook for the EUR.” 

“A strong USD suggests that a sharp rebound in EUR/USD may be out of reach near-term. That said, the tone of the June 9 ECB meeting is likely to be instrumental in determining whether or not EUR/USD can make a moderate recovery.”

“It is our central view that EUR/USD will end the year higher in the 1.10 area. This view has depended on the assumption that the ECB will have started to hike rates and on the coincident view that investors will be preparing for slower US growth next year.”

“The possibility of another covid related wave of economic uncertainty coinciding with aggressive Fed tightening would likely result in a stronger for longer USD.”