Euro Slumps Against Swiss Franc After French Elections

Euro Slumps Against Swiss Franc After French Elections

July 08, 2024

Risk Premium and Market Reactions

Claudia Panseri, head of investment in France for UBS’s Global Wealth Management unit, commented, “The risk premium on the euro seems to have faded to some extent already, and we don’t expect any sudden bouts of weakness against the dollar given the absence of a clear majority.” Panseri added that if the left were to impose its views, the single currency could fall below $1.05. However, if a moderate government is formed, it should help keep the EUR/USD pair around 1.08.

Swiss Franc as a Safe Haven

The Swiss franc benefited from a capital flight to greater security. Despite the euro recovering much of its initial losses against the dollar, the franc remained strong. Ipek Ozkardeskaya from Swissquote noted this trend, highlighting the franc's appeal during times of political uncertainty.

Political Shifts and Market Stability

“In the space of a weekend, France has shifted from an advantage for the far-right to a victory for the far-left,” said Ozkardeskaya, an analyst at the Gland-based online bank. The coalition led by Jean-Luc Mélenchon’s Insoumis has done little to reassure investors about the stability and predictability of French politics, she added. This political shift has significantly impacted investor confidence and currency stability in the region.

Future Outlook

The euro's performance against the franc and the dollar will continue to be influenced by the political landscape in France and broader European economic conditions. Investors will closely monitor any further developments in French politics and their potential impacts on the euro. As Europe navigates these political changes, the stability of currencies like the Swiss franc will remain a focal point for those seeking safer investments.

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