French President Emmanuel Macron called a snap parliamentary election yesterday in response to a massive victory by the far-right Rassemblement National in European elections. Marine Le Pen’s party secured over 31% of the popular vote compared to just 14.5% for Macron’s moderate alliance.
The euro now enters the week in freefall. GBP/EUR reached beyond last week’s highs during the Asian session and currently stands at its highest since August 2022. The euro also lost more than 0.5% to the US dollar all before the heavy traffic in Europe and the US had got a chance to return to their desks.
Away from France, far-right political groups also surged and are predicted to have won around a quarter of the available seats. The one small morsel of comfort for the centre was that Usual von der Leyen seems on course to retain control of parliament, and far-right stalwarts like Victor Orban and Geert Wilders underperformed expectations.
The elections are now coming thick and fast mid-way through the year. It’s an anxious time for those with an upcoming transaction, because as we’ve seen, a butterfly need only flap its wings in France, Hungary or indeed anywhere in the world for currency markets to experience huge volatility.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
Last week ended on the news that the US economy added 272k new jobs in May, the highest total in five months and well above forecasts of around 185k. That came after JOLTs job openings earlier in the week, which had pointed in the direction of contraction for the American labour market. Unemployment also rose, although only slightly — from 3.9% to 4%.
The European Central Bank (ECB) opted to cut interest rates by a quarter point (i.e. 0.25%) last week. In doing so, it became the first of the three major central banks to tighten rates since Russia’s invasion of Ukraine, as well as the first time the ECB has done so in five years.
That presented the Bank of England with a conundrum. The central banker’s task is tricky at the best of times, let alone when there’s an election going on. It is thought that the Bank will not look to cut rates before the election, but expect the cries to grow now that the ECB has made the first move.
Friday’s political discussion was dominated by Rishi Sunak’s timekeeping in Normandy. The Prime Minster left proceedings to mark the 80th anniversary of D-day early in order to tape a political broadcast with ITV, a move that angered many army veterans.
Here’s what to look out for this week…
UK unemployment figures for April arrive on Tuesday, although economists are predicting these to be unchanged from March.
The focus remains on the UK on Wednesday as April’s GDP figures also stream in. That’s followed by the ever-crucial US inflation and core inflation reads in the afternoon session, and the small matter of the Federal Reserve’s interest rate decision.
US PPI and the Michigan consumer sentiment survey then finish off the week, sandwiched either side of an interest rate decision from the Bank of Japan.
