Euro stumbles on French election jitters

The euro ticked lower on Tuesday as anxiety over the upcoming French parliamentary election continued to take its toll on the single currency.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR stable at €1.1853 and GBP/USD flat at $1.2682. GBP/CAD is rangebound at CA$1.7318, while GBP/AUD slumps to AU$1.8968 and GBP/NZD holds steady at NZ$2.0727.

Coming up, will a deterioration in German consumer sentiment act as a headwind for the euro today?

What’s been happening?

The euro was placed on the defensive yesterday amid ongoing French political uncertainty.

With just days to go before France heads to the polls for the first round of a snap parliamentary election called by President Emmanuel Macron, markets are growing increasingly nervous about what comes next.

EUR investors fear that a hung parliament could create even more uncertainty and disrupt Macron’s final years in office.

The US dollar, meanwhile, was supported on Tuesday by comments from Federal Reserve policymaker Michelle Bowman.

In a speech in London, Bowman said she doesn’t think a cut to interest rates is appropriate at this time and that she is open to a rate hike if inflationary pressures persist.

This upside in USD was also underpinned by a stronger-than-expected US consumer confidence survey.

At the same time, the pound traded sideways yesterday amid a lull in data and ahead of the UK’s general election next week.

What’s coming up?

Today’s session kicked off with the publication of Germany’s latest consumer confidence index.

The index shows that sentiment heading into July declined for the first time in five months.

The deterioration of consumer morale in the Eurozone’s largest economy, coupled with ongoing French election jitters, may extend the euro’s losses today.

For GBP investors, the focus may be on the Confederation of British Industry’s (CBI) latest distributive trades index. June’s survey is expected to report a modest drop in retail sales growth, but that the sales balance remained positive, which may support the pound.

Finally, in the absence of any notable US economic data, movement in the US dollar may be tied to market risk dynamics today. Will an optimistic mood limit USD demand?