Unstable situation in the Eurozone puts pressure on the euro | 17 June 2024

EURUSD:

The EUR and USD pair starts the new week on a subdued note and consolidates its recent strong losses to its lowest level since early May, around 1.0670-1.0665 reached on Friday. Spot prices are currently trading around 1.0700 and look likely to continue the downward trajectory seen over the past two weeks.

The euro continues to be undermined by concerns that the snap election in France will worsen the financial situation in the Eurozone's second largest economy, amid the right-wing National Front party's lead in opinion polls. On Friday, French Finance Minister Bruno Le Maire said the country faces a financial crisis if the right or left wins because of its big spending plans. This, along with a modest rise in the US Dollar (USD), confirms a negative outlook for EUR/USD in the near term.

The hawkish stance of the Federal Reserve (Fed) following its June meeting, whereby the median forecast calls for only one rate cut in 2024, continues to support rising US Treasury yields. In addition, ongoing geopolitical tensions in the Middle East are another factor supporting the safe-haven US dollar, indicating that the path of least resistance for EUR/USD lies to the downside. Meanwhile, signs of easing inflationary pressures in the US keep the door open for the Fed's first interest rate cut in September.

The bets were bolstered by US data released on Friday, which showed that import prices unexpectedly fell in May, further strengthening the outlook for domestic inflation. In addition, a University of Michigan survey showed that US consumer sentiment deteriorated sharply in June, which in turn may deter dollar bulls from aggressive bets and help limit EUR/USD losses. No important economic data will be released from the US on Monday, so spot prices will remain at the mercy of the dollar.

Trading recommendation: Trade predominantly with Sell orders from the current price level

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