Euro Short-Term Depreciation Risk Rises, German Politics Add Pressure, Energy and France Uncertainty Weigh

[Euro short-term depreciation risk rises, German politics add pressure, energy and France uncertainty weigh]

(1) The head of FX research at MUFG Bank noted in a report that the risk of further euro depreciation in the short term is rising.

(2) The weekend defeat of Chancellor Merz's CDU in local elections has intensified this pressure, with political uncertainty making the market more cautious on the euro's outlook.

(3) Meanwhile, elevated energy prices and political uncertainty in France could also pose potential downside pressure on the euro.

(4) From a technical perspective, the euro's trajectory is also unfavorable, as it is currently breaking below key levels, further reinforcing short-term bearish signals.

(5) The head stated that although this move is currently driven more by dollar strength, if negative energy terms-of-trade shocks begin to undermine business confidence, the eurozone's macro backdrop could gradually deteriorate.

(6) Analysts pointed out that the euro currently faces intertwined pressures from political, energy, and macro factors, and the exchange rate may remain weak in the short term.

(7) Going forward, key focus areas include eurozone energy price trends, French political developments, and economic sentiment data, to assess whether the euro can stabilize or continue to face pressure.