EURUSD Fundamental Analysis – 18-June-2024

EUR/USD—The Euro has stabilized around $1.07, hovering at a seven-week low after experiencing a 0.8% decline last week. This comes amid heightened scrutiny of the political situation in France, where upcoming legislative elections on June 30th and July 7th could significantly impact the economic landscape.

France Faces Rising Bond Yields Amid Policy Shift

The far-right National Rally, currently leading in the polls, has proposed policies such as reducing sales taxes and lowering the retirement age. These potential changes have led to a sharp increase in France’s risk premium and bond yields as investors express concern over possible government spending increases that might harm the country’s fiscal health.

Le Pen Promises Stability if National Rally Wins

Marine Le Pen, the leader of the National Rally, has attempted to reassure moderates and investors by stating her respect for institutions and her intention not to oust President Macron if her party wins. This statement was made to Le Figaro newspaper as part of her broader strategy to gain more comprehensive support.

ECB’s First Rate Cut in Five Years

At the same time, the European Central Bank (ECB) has recently implemented its first rate cut in five years but remains cautious about further cuts. This caution is due to ongoing inflationary pressures within the Eurozone. Notably, wages in the region rose by 5.3% year-on-year in the first quarter, marking the most significant increase since the last quarter of 2022.

Summary

Understanding these dynamics is crucial for investors and policymakers alike, as the interplay between political developments and economic indicators will shape the Euro’s trajectory and broader market stability.

About The Author