The euro’s post-vote stumble continues, with the currency hitting a new low after the election of Emmanuel Macron as president of France.

The euro is down 0.1 per cent on the day so far – a small move but with a low of $1.0856 that marks a new low point since Mr Macron’s victory on Sunday.

Commerzbank said euro weakness is owing to a stronger dollar on comments from Federal Reserve officials suggesting a higher likelihood the the Fed would conduct two rate hikes this year, rather than the market viewing Mr Macron’s election in a negative light.

The President of the Cleveland Fed Loretta Mester kick-started things at the beginning of the week and warned against raising interest rates too slowly. Moreover she spoke out in favour of starting to reduce the Fed’s inflated balance sheet before the end of the year. Mester was supported by her colleagues the Kansas Fed President Esther George as well as Boston Fed President Eric Rosengren. Even if the FOMC’s communication was far from exemplary in the past, the market nonetheless did not remain completely unaffected by the comments and is now once again pricing in a slightly higher likelihood of two rate hikes this year.

MUFG said it is “confident that the euro has bottomed out” and predicts it will reach $1.14 by the end of the year.

Lee Hardman, currency analyst at MUFG said:

Light is beginning to emerge at the end of the tunnel for the euro and we’re confident that it has bottomed out following the French election. European political risk is likely to go on the back burner now until the Italian elections next year.

The market’s focus is now going to switch to the improving economic conditions in the Eurozone. We expect the ECB to take small steps towards tightening monetary policy in June.

Some analysts believe the euro has already topped out. Read more on that here.

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