Investing.com – suffered a blow on Monday as winds of political uncertainty quickly spread across the continent, prompting further calls for more trouble for the single currency.

“We maintain our view that EUR/USD will reach 1.05 and remain at this level in the second half of 2024.” Macquarie said in a note on Monday, after a shift to the right in the European Parliament elections and a surprise early election in France brought political uncertainty in the European Union back to the top of the agenda. Macquarie called in mid-May for the euro to fall to $1.05.

Ahead of the European Parliament results, Macquarie warned that “the gains of the populist right will herald new concerns for the political stability and unity of the European Union.”

Adding fuel to the embers of political uncertainty, French President Emmanuel Macron has called early elections in a move widely seen as a major risk for his Ensemble party.

The upcoming National Assembly elections scheduled for June 30 and July 7 may result in the French president’s coalition “losing some seats to the RN,” adds Macquarie, while his Band party “will certainly not become a majority coalition.”

The call for political uncertainty to weigh on the euro has history on its side. In 2017, the UK’s decision to leave the EU following the 2016 referendum sparked a wave of Euroscepticism, raising concerns about the future of the European Union and pushing the euro below parity against the dollar.

“We expect there will be the same pressure now as well,” Macquarie warned.

Meanwhile, dollar strength is also likely to support the euro as the Fed is expected to make a hawkish pause on Wednesday, lowering the prospect of interest rate cuts to two from three this year.

The Fed’s hawkishness will come as the ECB, BoC, SNB and Riksbank “ease monetary policy, this could further accentuate the Fed’s relative hawkishness and thus favor the US dollar,” Macquarie added.