French/German yield spreads have narrowed a little and the Euro (EUR) has edged up after representatives of France's National Rally (RN) party have said the party will respect the nation's budget rules, Global Head of Markets at ING Chris Turner notes.

EUR/USD needs force to break above 1.0760

“Our eurozone macro team sees continued stress here and we would therefore warn against chasing EUR/USD back to and over 1.08, since there are still many possibly bearish chapters to play out here. One of those could be the Leftist Alliance doing a little better than expected in Sunday's elections.”

“And while bond investors will welcome soothing words from the RN about France's budget trajectory, our team suspects it is too early for the party to be making significant concessions to its manifesto.”

“We therefore expect that the euro will struggle to sustain a rally over the coming weeks and that key euro cross rates, such as EUR/AUD and EUR/NOK, will come lower. These moves should accelerate should US inflation indeed come in on the low side. EUR/USD may therefore struggle to break to the topside of its 1.0660-1.0760 range.”