Home Daily Commentaries Euro slips on French political uncertainty

Euro slips on French political uncertainty

Jake Trask
Written by
Jake Trask

Jake Trask

OFXpert

Based in London, Jake boasts a rich and extensive career in the foreign exchange industry, spanning 15 years.

| Monday 8 July, 2024

Daily Currency Update

On Friday, the latest US jobs report revealed that the Non-Farm Payrolls figure once again exceeded expectations, with 206,000 jobs added last month compared to the estimated 191,000. The immediate reaction was a strengthening of the dollar, pushing GBP/USD and EUR/USD to lows of 1.2755 and 1.0795, respectively. However, this rally was short-lived as the previous month's impressive figure of 272,000 was revised down to 218,000, and the unemployment rate rose to 4.1%.

The Federal Reserve is closely monitoring the unemployment rate as it may help curb inflation, which is currently well above the Fed's 2% target. By the end of the session, EUR/USD was back above 1.08, and GBP/USD above 1.28, with additional support for the latter, likely coming from the stability expected in UK politics following Labour’s victory in the UK General Election. Currently, GBP/USD is around 1.28, with GBP/EUR up to 1.1830.

Key Movers

Yesterday's second round of French parliamentary elections saw tactical manoeuvring by opponents of the Far-Right's Rassemblement National, pushing them into third place contrary to expectations. The far-left coalition, led by veteran politician Jean-Luc Mélenchon, won the most votes, while President Emmanuel Macron’s centrists took second place. While many celebrate the defeat of the far-right, the result leaves three political alliances with nearly equal shares in the National Assembly, making government formation challenging. This political uncertainty could hinder French economic output, posing headwinds for the euro.

Tomorrow, US Federal Reserve Chairman Jay Powell begins his two-day semi-annual testimony before the House Financial Services Committee, where investors will seek clues on when the Fed might start cutting interest rates. With a quiet start to the week on the data front, the fallout from the French election is likely to dominate the news. EUR/USD has opened slightly lower this morning, currently trading at 1.0825.

Expected Ranges

  • GBP/USD: 1.2755 - 1.2860 ▲
  • GBP/EUR: 1.1765 - 1.1865 ▲
  • GBP/AUD: 1.8920 - 1.9065 ▲
  • EUR/USD: 1.0760 - 1.0860 ▼

Written by

Jake Trask

OFXpert

As a Senior Corporate Client Manager, Jake and his team manage a diverse portfolio of 250 businesses to meet their varied foreign exchange needs. He enjoys untangling the complexities of foreign exchange dynamics, constantly striving to provide clients with the most informed insights and strategies to navigate these fluctuations successfully.

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