EUR: Election jitters and ECB rate cut add to downside pressures EUR: Election jitters and ECB rate cut add to downside pressures EUR: Election jitters and ECB rate cut add to downside pressures

EUR: Election jitters and ECB rate cut add to downside pressures

Forex 5 minutes to read
Charu Chanana

Head of FX Strategy

Key points:

  • EURUSD down to over 1-month lows as a fallout from the EU parliament election outcome resulting in a snap election being called in France
  • The ECB’s recent rate cut has also weakened euro’s yield advantage, likely limiting the upside.
  • EURUSD might stabilize amid upcoming US inflation data and the Fed meeting, but medium-term risks for the euro remain high, with potential to drop towards 1.05.


The euro is experiencing significant downward pressure, with EURUSD sliding below the 1.0780 support level and hitting over 1-month lows due to a double blow:

  1. Stronger US Dollar: A surprise upside in the Non-Farm Payrolls (NFP) report suggests a more robust US labor market than anticipated, potentially delaying Fed rate cut expectations.
  2. EU Political Turmoil: Political instability in the EU is adding pressure on the euro. Leaders from Germany and France faced defeats in the EU parliament elections, with far-right parties gaining traction. French President Macron called for a snap election in France after a humiliating defeat, potentially leading to more political instability. This adds to deficit risk, highlighted by S&P’s recent downgrade of France’s sovereign credit rating.

The bearish sentiment is further fueled by last week's ECB rate cut, which, despite a neutral bias and non-committal approach to further easing. The central bank’s rate cut has lowered the yield advantage on the euro. The ECB’s dovish stance compared to the Fed, and potential for further cuts, exacerbates this.

Additional factors contributing to short-term bearishness include:

  1. Slowing China Momentum: The recent gains in China are slowing, and the scope for fresh stimulus is increasingly difficult as Fed rate cuts are delayed.
  2. CFTC Positioning: Net long positions on the euro have reached their highest levels since March.


EURUSD is currently trading around 1.0760 and could test 1.0720 as US markets come online. However, there could be room for recovery later in the week as liquidity improves and markets position for the US CPI and Fed meeting.

The resilient US economy might prompt the Fed to shift to a relatively hawkish stance, potentially guiding for two rate cuts this year instead of three in their Dot Plot. This would still be a dovish message compared to market expectations, which signal ~36bps of rate cuts for this year.

To summarize, the scenarios for EURUSD this week include:

  1. Fed’s Dot Plot Showing 1 Rate Cut for 2024: EURUSD could move lower to 1.07.
  2. Fed’s Dot Plot Showing 2 Rate Cuts for 2024: EURUSD could rebound to 1.0820+.
  3. Fed’s Dot Plot Showing 3 Rate Cuts for 2024: EURUSD could climb back to 1.09.

In the medium term, risks for the euro have increased, opening the door to a potential move towards 1.05.

Source: Bloomberg. Note: Past performance does not indicate future performance.

Recent FX articles and podcasts:

Recent Macro articles and podcasts:

Weekly FX Chartbooks:

FX 101 Series:


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.