Euro (EUR/USD) Analysis

• Focus returns to Europe and France in particular in the lead up to the elections
• Will the ECB step in to calm widening bond spreads considering Frances debt load?
• EUR/USD fails to capitalize on Mondays reprieve – downside risks remain
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

Will the ECB Step in to calm widening bond spreads considering France's debt load?

With last week’s top tier US data and the FOMC out of the way, the focus returns to Europe and France in particular. The campaign effort is in full swing ahead of the first round of parliamentary elections on the 30th of this month where representatives across the entire political spectrum campaign for votes.

The resounding rise in popularity for Marine Le pen’s National Rally party in the European elections has spooked markets ahead of the snap election. Markets seek stability and certainty and broadly view the Eurosceptic National Rally as an unpredictable force weighing on European bond markets currently.

French-German spreads reveal a notable risk premium that has been applied to riskier nations with higher debt loads like Italy and France, while investors have piled into safer German bonds. A sell-off in periphery nations’ bonds tends to be followed by a weaker euro – something to monitor as France head to the voting booths.

French-German 10Y Bond Spread (Risk Gauge)