Emmanuel Macron has been re-elected, with initial results indicating a 58% vs. 42% victory over Marine Le Pen. This implies policy continuity, and the EUR may see some modest and short-term upside on the largely expected result. Yet, the Eurozone’s increasingly negative macro backdrop will likely cap EUR gains, in the view of economists at HSBC.

Short-term modest upside for EUR amid French elections

“The EUR may see some modest and short-term upside on the news that Macron looks set to remain France’s president. However, the fact that this should not come as a major surprise to the market and the challenging broader picture for the EUR should ensure that any move higher in EUR is capped, however.”

“Investors taking short EUR positions have been less interested in French politics and more focused on the Eurozone’s increasingly negative macro backdrop and worsening growth-inflation trade-off. Until this starts to show signs of improving, it will be difficult for EUR/USD to break out of the broad downtrend that has been firmly in place since June 2021.”