Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Market Specialist
EURUSD has been on the backfoot in recent weeks due to French election risks and dovish market sentiments following the ECB’s recent rate cut. In the first round of the French legislative elections, Marine Le Pen’s National Rally secured 34% of the votes that saw a kneejerk reaction from the EUR, causing EURUSD to rally above 1.0750 in relief as the market was expecting a higher vote share. However, ongoing political uncertainty implies heightened volatility, and it may continue to limit EUR’s upside potential in the medium term. The upcoming second round of French election on July 7 is expected to be the major driver of the movements in EURUSD in the near term.
EURUSD could experience a relief rally if the risks associated with the French election are priced out. However, even if the Federal Reserve adopts a more dovish stance in Q3, the euro will likely remain at a yield disadvantage compared to the US dollar. Additionally, risks from the US presidential election could impact the EUR, with any moves above 1.09 likely attracting sellers.
Buy Put/Sell Call for 1 month
Buy Put/Sell Put/Sell Call for 1 month
Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 1 month for a notional value of EUR 100k
Buy Put/Sell Call for 3 months
Buy Put/Sell Put/Sell Call for 3 months
Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 3 months for a notional value of EUR 100k
Buy Call/Sell Put for 1 month
Buy Call/Sell Call/Sell Put for 1 month
Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 1 month for a notional value of EUR 100k
Buy Call/Sell Put for 3 months
Buy Call/Sell Call/Sell Put for 3 months
Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 3 months for a notional value of EUR 100K
Important disclaimer: The impact of swaps is not taken into consideration in the scenario above. The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and consider their unique financial situation, risk tolerance, and investment objectives before making any decisions.
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