The relief rally in the Euro (EUR) following French election results being in line with expectations ran out of steam on Monday, and there are doubts there will be significant extra support for the common currency given the open questions ahead of the second round on Sunday 7 July, ING’s FX strategist Francesco Pesole notes.

EUR/USD to jump to 1.0800 in the short run

“Interestingly, the support for other European currencies was not homogenous, with markets picking the higher-yielding NOK and GBP over the lower yielding SEK and CHF. A strengthening in NOK/SEK on the back of policy divergence is one of our core calls for this summer.”

“Another reason that EUR does not look likely to get much idiosyncratic support is that regional CPI estimates have so far come in in line with expectations, and pointed at declining inflation in the eurozone in June. Consensus for today’s eurozone-wide prints are 2.5% for headline and 2.8% for core.”

“We think USD is looking at some downside risks, but EUR appears in a worse position compared to high-beta currencies like NOK, AUD and NZD. A USD-driven move to 1.0800 is possible in EUR/USD in the next couple of days, but the upside should remain capped by French political risk this week, in our view.”