Euro: Political risk weighs but downside seen limited – ABN AMRO
ABN AMRO strategist Georgette Boele notes that changes in interest rate spreads have encouraged speculative short Euro positions, while fiscal and political uncertainty in France and Spain has historically coincided with Euro (EUR) weakness versus the US Dollar (USD).
ABN AMRO strategist Georgette Boele highlights that political uncertainty in France and Spain has been weighing on the Euro (EUR) against the US Dollar (USD). Speculative investors have taken short Euro and long Dollar positions due to changes in interest rate spreads, which encourage such trading. The Euro tends to weaken when government bond yields in major Eurozone countries rise sharply because of political and fiscal concerns.
Recent fear of contagion has further impacted the currency. Boele expects sentiment and EUR/USD to remain negative in the short term, but does not anticipate a continued sell-off. She keeps her end-2026 forecast for EUR/USD at 1.15.
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