The French polls were wrong..

GBP

The Pound is at a 2-week high versus the Euro and a 1-month high against the US Dollar. Neither highs are due to last week's Labour victory which had 0 effect on financial markets. Instead, both the € & $ are weaker, leaving the £ in an unusual positive position

In the grand scheme of things, GBP v USD is trading 'favourably' and is around one of the best time to trade since early March. In fact, it is currently at the 3rd highest point in the last 12-months..

Regardless of what is going on in France, GBP v EUR is a serious 'buy'. The pair is currently just 0.5% below last month's high, which was the highest it has been since August 2022..

There are no major events planned for the UK this week apart from Thursday's GDP release which is likely to be a non-event. 




EUR
The Euro is weaker following the French election result, which the polls called wrong. Round 1 was won marginally by Marine Le Pen, who then came in 3rd in last night's vote. Instead, a coalition between the left-wing and the far-left-wing parties won.

Financial markets saw a Euro sell-off as France now faces a period of fiscal and of course political uncertainty. A majority win of the left was the worst-case scenario with a minority win the '3rd worst case'. Parliamentary gridlock now looks set to ensue, which could both be good and bad for the Euro..

The winning party NFP have significant spending plans with no clear way of being able to afford the budget. Minimum wage is expected to rise to €1,600, they want a price ceiling on essential foods and energy, lower the retirement age and invest massively in public services and a green transition, all at a time when French finances are out of control.

It is for this reason, that the £-€ rate could go higher both short and long term, before the BoE decide to lower interest rates..



USD
Calls for a September interest rate cut are hotting up over the pond. Last week, the US' labour market report showed conditions continuing to cool. Many fear the unemployment rate could rise quickly should interest rates be held for much longer. 

Average earnings have softened and economically things have slowed in the US too. The inflation release is expected to maintain its 'stickiness' on Thursday, which is the reason why most economists don't expect to see an interest rate cut this year. 

Upcoming Data
Monday 8th July 2024
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Tuesday 9th July 2024
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Thursday 11th July 2024
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Friday 12th July 2024
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