EUR/USD: a political risk attached to greenback - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that the euro has displayed renewed weakness so far this month resulting in EUR/USD falling back below the 1.1000-level.

Key Quotes:

"The main fundamental drivers for the move lower in EUR/USD have been a reduction in the political risk premium attached to the US dollar. According to fivethirtyeight.com’s poll only model, the likelihood of Donald Trump becoming the next US President has nose-dived to around a “one in eight” probability. The FX market has subsequently adjusted leaving minimal risk priced in of Donald Trump becoming Presiden.t"

"The adjustment has been most evident by the 8% rebound in the Mexican peso. Secondly, the increased likelihood of a “harder Brexit” has undermined the relative attractiveness of the euro. The ECB has clearly signalled that risks to the euro area growth outlook remain titled to the downside and relate mainly to the external environment including Brexit uncertainties."