Monthly Wrap: EUR – Euro fluctuates amid political uncertainty
Samuel Birnie July 10th 2024 - 2 minute read
Key takeaways:
– Euro rocked by French elections
-Slowing Eurozone inflation also drags on EUR
– EUR monthly highs: £0.85, $1.08, AU$1.64, NZ$1.77, C$1.48
– EUR monthly lows: £0.84, $1.06, AU$1.59, NZ$1.73, C$1.46
The euro faced headwinds at the beginning of June after the latest US non-farm payrolls report smashed forecasts, slashing Federal Reserve interest rate cut bets. Due to the euro’s negative correlation with the US dollar, it therefore struggled to garner investor attention.
In addition, anxiety in the wake of the European elections also weighed on the euro, as a rise in far-right gains led to increased worry surrounding political instability within the Eurozone.
This turmoil was exacerbated when French President Emmanual Macron shocked markets by calling a snap general election.
The first round of the election saw support for the far-right National Rally (RN) party fall short of expectations, easing fears of a majority RN government and its populist fiscal policies, which saw the euro rise to multi-week highs.
Further volatility followed the second round amid confirmation of a hung parliament. While the RN were relegated to third place, concerns over potential political gridlock in the Eurozone’s second largest economy took its toll on the single currency.
Sandwiched in between the French election was the Eurozone’s latest consumer price index. A slowdown in headline inflation last month dragged on the euro as it bolstered European Central Bank (ECB) interest rate cut bets.
Looking forward, the fallout from the French election may continue to infuse volatility into the euro in the coming weeks.
Meanwhile the ECB will hold its latest policy meeting in the second half of July.
No policy changes are currently expected from the bank this month, particularly after the minutes from the bank’s previous meeting revealed that support for its rate cut was far from unanimous.
However, if the bank signals that more cuts may be coming later in the year, the euro may remain vulnerable to losses.
Written by
Samuel Birnie