GBP/EUR strikes 22-month high amid European political uncertainty

The euro tumbled on Monday amid heightened political and policy uncertainty in the EU, following the European elections.

Meanwhile, the pound is struggling to attract support this morning with GBP/EUR subdued at €1.1809 and GBP/USD muted at $1.2718. GBP/CAD is flat at CA$1.7497, while GBP/AUD and GBP/NZD hold steady at AU$1.9251 and NZ$2.0755, respectively.

Coming up, will a rise in UK unemployment weigh on Sterling through today’s session?

What’s been happening?

The euro got off to a poor start this week amid the fallout of the European elections over the weekend.

EUR sentiment weakened as the elections saw far-right Eurosceptic parties make strong gains in European parliament, which could make it more difficult to pass legislation.

EUR investors were unnerved by the situation in France, after President Emmanuel Macron called a snap election in response to his party’s heavy defeat.

The pound, meanwhile, traded without strong direction on Monday as GBP investors awaited the publication of Labour’s and the Conservatives’ election manifestos later in the week.

Finally, the US dollar was able to attract some modest support during yesterday’s session as US investors continued to trim their bets for multiple Federal Reserve interest rate cuts later in the year.

This follows Friday’s non farm payroll figures, which suggest the US labour market remains strong, despite interest rates being at a 23-year high.

What’s coming up?

Turning to today, the session kicked off with the publication of the UK’s latest jobs report.

This has seen the pound stumble as the data showed a shock rise in unemployment in April, although stronger-than-expected wage growth is helping to limit Sterling’s losses.

On the other side of the Channel, the political uncertainty stemming from the European elections may continue to act as a headwind for the euro today, amid the absence of any notable Eurozone economic data.

Meanwhile, movement in the US dollar may be limited today, as USD investors hold off from making any aggressive bets ahead of Wednesday’s Fed rate decision and US consumer price index.