The Euro (EUR) is trading stronger this morning after the outcome of the first-round French parliamentary elections came in quite close to polls, with a victory for the National Rally. We think this week’s US data can push EUR/USD higher, but French politics can still put a cap on the pair this summer, ING FX strategist Francesco Pesole notes.
France elections continue to drive Euro movements
“It appears that EUR/USD is getting rid of some political risk premium this morning after preliminary results from the first round of French parliamentary elections came in close to pre-vote polls. The positive reaction in the EUR is, in our view, primarily due to some market relief for the New Popular Front not gaining more than expected.”
“On the data side, the eurozone calendar’s main highlight is the flash CPI estimates for June, released tomorrow. The ECB’s forum in Sintra runs from today until Wednesday and will offer plenty of discussion on policy and inflation. Among speakers, ECB President Christine Lagarde, Federal Reserve (Fed) Chair Jerome Powell, Isabel Schnabel and Philip Lane stand out. On Thursday, June’s ECB minutes are released.”
“Markets should end this week with a slightly clearer picture on the ECB path ahead given CPI data and ECB-speak, but the political factor should remain the main driver for the common currency until next week’s second round results in France are out. We think soft US data can help a move above 1.0800, but a return to 1.0900 is a relatively long shot considering risks of rewidening EGB spreads.”
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