The euro has broadly remained in an uptrend since the beginning of the month.
However, the European currency was relatively calm following France’s election results, which indicated a possibility of a hung parliament due to the strong performance of the left-wing New Popular Front (NFP) alliance and the absence of a clear majority.
This unexpected outcome has heightened uncertainty over France’s fiscal outlook, with market participants concerned about implications for fiscal deficits and eurozone stability.
The rise of left-wing parties and increasing political uncertainties in France could create a bearish sentiment for the euro, limiting the currency’s medium-term upside.
French bond yields pulled back last week but stabilized somewhat in early European trading, though they remain under pressure. Price action in French fixed-income markets reflects investor uncertainty, with market participants seeking a clearer direction. Looking ahead, yields on French bonds could rebound in the near term as uncertainty around the direction of a new government could continue to fuel investors’ concerns.
