The Euro remains under selling pressure, with EUR/USD testing support at the 1.1200 level, as political risks in the euro-zone intensify following Spanish Prime Minister Pedro Sanchez's decision to call an early election for November 29 [1]. According to MUFG’s Lee Hardman, recent opinion polls indicate that the centre-right People’s Party is well positioned to become the largest party after the election, though it would require support from other parties to form a majority, potentially in coalition with VoX [1].
While the snap election in Spain adds to near-term political uncertainty in the euro-zone, Hardman notes that the outcome is not expected to materially increase downside risks for the euro [1]. Instead, the performance of the euro heading into year-end is seen as being more influenced by developments in the French government bond market, including the potential for contagion and the response of policymakers [1]. The risks are currently skewed towards further euro weakness, with market participants closely monitoring the situation [1].
No specific market reactions or analyst forecasts beyond these points are provided in the source article [1].
CONCLUSION
The euro faces ongoing pressure due to heightened political uncertainty in Spain and concerns over the French bond market. While the Spanish snap election adds to short-term risks, the broader outlook for the euro is more closely tied to developments in France and potential contagion effects. Market sentiment remains cautious, with risks tilted towards further euro weakness.