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EURUSD: Vol Markets Reverse Downside Risk in Wake of French Results

EURUSD
  • As evidenced in the recovery off opening lows for EUR/USD, markets are taking the lack of a majority in France's National Assembly in their stride. Sell-side views generally see the results as adding more uncertainty near-term, but avoiding a worst case scenario up to the 2027 Presidential vote. 
  • Options markets have taken note, with the front-end of the EUR/USD risk reversals curve normalizing further to touch the highest level June 10th (the session after Macron's election call). 
  • Vol markets now imply a 22.5% chance of EUR/USD trading below 1.0750 at end-July, well below the 40.4% implied just after Macron's snap election announcement. This also captures the next ECB rate decision on July 18th - which, while not expected to result in a rate cut, will be watched for messaging on a potential September move. 
     

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