Ella 
EUR/USD fell to a more than one-month low as the EU parliamentary election results led to early elections in France.
The recent ECB rate cuts also weakened the euro’s yield advantage, which may limit the euro’s upside.
EUR/USD may stabilize on the backdrop of upcoming US inflation data and the Fed meeting, but the medium-term risks for the euro remain high, with a possibility of a decline towards 1.05.
The euro is under great downward pressure, with EUR/USD sliding below the 1.0780 support level and hitting a more than one-month low due to a double whammy:
USD strengthens: Non-farm payrolls (NFP) unexpectedly rose, indicating a stronger than expected US labor market, which may delay the expected Fed rate cut.
EU political turmoil: The political instability in the EU puts pressure on the euro. The leaders of Germany and France suffered defeats in the EU parliamentary elections, and the far-right parties gained support. French President Emmanuel Macron called for early elections after a humiliating defeat, which may lead to more political instability. This increases deficit risks, which was highlighted by the recent downgrade of France’s sovereign credit rating by Standard & Poor’s.
The bearish sentiment was further exacerbated by the European Central Bank’s rate cut last week, even though the central bank was neutral on further easing and did not commit. The central bank’s rate cut reduced the euro’s yield advantage. The ECB’s dovish stance compared to the Fed and the possibility of further rate cuts exacerbated the situation.
