Derek Halpenny, head of FX research at Mitsubishi UFJ Financial Group, said in a
note the near-term risk of further euro depreciation is rising. He cited weekend
local-election losses for Chancellor Merz’s CDU, elevated energy prices and
French political uncertainty as potential additional pressures. Technically the
euro is weakening, breaking key levels. Halpenny added that while the move is
currently driven more by US dollar strength, if adverse energy terms-of-trade
shocks begin to dent corporate confidence the eurozone macro backdrop could
deteriorate.