The Euro is slowly giving up gains accrued over the past two weeks as investors continue to take profits in the aftermath of the French Presidential election. Following Emmanuel Macron’s resounding victory, it appears there are no fresh catalysts able to push the popular currency past its six-month high achieved on Monday.
While the Victory of EU centrist Macron signaled an end, for now, to political risk in the euro, fresh catalysts are needed if the current downtrend is to be brought to a halt. EUR/USD has since clocked this week’s lows of $1.09 against the Dollar (CURRENCY:USD) amidst growing pressure from the greenback which is growing in strength. The Euro against the Yen is also taking a hit having shed 0.38% in Tuesday early trading session, to 123.5, on clocking one year high of 124.49 on Monday.
Ahead of the polls on Sunday, markets had already priced in a Macron victory given that he held a +20 lead in polls over his rival, Marine Le Pen. With elections out of the way, focus is already shifting to other factors that could affect the popular trading block.
Traders have already started analyzing some of the challenges that the 39-year-old president could face especially when it comes to labor market reforms.
“We expect the focus to shift to French legislative elections in June. These will be crucial for determining Macron’s ability to implement his economic programmer, which includes labor market reforms that would make it easier for French businesses to hire and fire,” said analysts at BlackRock in a note.
The same coupled with growing investor confidence that the U.S Federal reserve will hike interest rates at their next meeting in June is not helping the EUR in the market.
Given that the French election overshadowed U.S jobs report traders have already started to take note of the fact that the U.S economy could do with another rate hike, sooner than later. U.S jobs report showing that the economy added 211,000 jobs in April is already reinvigorating talk of the strength of the U.S. economy.
Markets are currently pricing a 75% chance that the FED will hike rates in June. Friday’s sales report as well as consumer price index should help shed more light on the U.S. economy and could consequently affect the strength of the dollar index.