Macron topped the first round of the French elections and the euro rallied. We described the levels to watch out for. Here are two opinions

Here is their view, courtesy of eFXnews:

EUR/USD: ‘The Trend Has Turned’ – SocGen

Societe Generale FX Strategy Research discusses the EUR outlook after the market-friendly outcome for the first round of the French elections.

Looking at yield differentials as a guide to where EUR/USD is headed, SocGen notes that the low in EUR/USD came when real yields were down at -120bp in Germany, and +50bp in the US and that gap narrowed to 105bp by the end of last week.

If this gap continues to tighten further, divergence could add over 50bp to German real yields, and a 50bp narrowing in the US/German real yield differential would suggest EUR/USD ‘ought’ to be at 1.14, SocGen argues.

Moreover, SocGen notes that EUR should also continue to gain support on the back of the Euro Area’s current account surplus.

“This like many other indicators, including the Treasury/Bund spread, just reinforces the impression that the bottom in EUR/USD is behind us and the trend has turned,” SocGen argues.

EUR/USD is trading circa 1.0863 as of writing.

EUR: Initial Adjustment Higher On French Elections Results; What’s Next? – BTMU

BTMU FX Strategy Research notes that the EUR reaction to the results of the first round of the French elections has been in line with its expectations for a EUR limited relief rally (see here).

So, what’s next after EUR’s the initial adjustment higher has taken place? BTMU doesn’t expect the French elections to have much further impact on the euro in the near-term.

“The market’s focus will begin to shift away from political risk in Europe, and more onto the improving economic fundamentals which should begin to offer the euro more support going forward. We expect the improving economic fundamentals to prompt the ECB to adopt a less dovish policy stance in the coming quarters as it outlines plans to taper and end QE in 2018,” BTMU argues.

This view is in line with BTMU’s outlook for EUR/USD to gradually drift higher towards the 1.1200-level by year end. 

EUR/USD is trading circa 1.2867 as of writing.