The euro may face renewed selling pressure if France holds parliamentary elections before the end of the year, following the resignation of Prime Minister Sébastien Lecornu, according to MUFG Bank’s Lee Hardman.
- In a research note, Hardman said that snap elections would prolong France’s political uncertainty and increase downside risks for the common currency.
- While MUFG still expects the euro to strengthen over time, such a development could derail the move toward its year-end target of $1.20.
- “We’re not convinced that parliamentary elections alone would trigger a sustained reversal of the euro’s broader uptrend,” Hardman wrote, “but they would make it less likely the currency hits our target by year-end.”
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MUFG not alone in this take. Some likely market-impact to watch for include:
- FX: Political uncertainty in France could slow the euro’s advance, especially against the U.S. dollar, as investors weigh fiscal and stability risks.
- Rates: Renewed political volatility in the euro area may widen sovereign spreads and support safe-haven demand for core bonds.
- Equities: European stocks could see increased volatility if French elections unsettle investor confidence heading into year
