He Euro (EUR) is trading stronger this morning after the result of the first round of the French parliamentary elections was quite close in the polls, with a victory for the National Rally. We think this week’s US data can push EUR/USD higher, but French politics may still put a cap on the pair this summer, says ING FX strategist Francesco Pesole.
French elections continue to drive Euro movements
“EUR/USD appears to be shedding some of the political risk premium this morning after preliminary results from the first round of the French parliamentary elections came in close to pre-vote polls. The positive reaction in EUR is, in our view, mainly due to some market relief that the New Popular Front did not win more than expected.”
“On the data front, the main highlight of the eurozone calendar is the preliminary CPI estimates for June, due tomorrow. The ECB forum in Sintra runs from today until Wednesday and will offer plenty of policy and inflation discussions. Speakers include ECB President Christine Lagarde, Federal Reserve (Fed) Chair Jerome Powell, Isabel Schnabel and Philip Lane. The ECB minutes for June are due on Thursday.”
“Markets should end this week with a slightly clearer picture on the ECB’s path given the CPI data and ECB statements, but the political factor should remain the main driver of the common currency until the results of the second round in France are known next week. We think weak US data may help a move above 1.0800, but a return to 1.0900 is a relatively remote possibility considering the risks of a widening of EGB spreads.”
Source: Fx Street

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