Marine Le Pen's party performed well in France's parliamentary elections, giving the euro a short-term boost, and the crucial second runoff elections are to be held on July 7.
1. French elections and their impact on the Euro (EUR):
Marine Le Pen's National Rally (RN) party performance:
Marine Le Pen's far-right National Rally (RN) party made a remarkable performance in the first round of the French parliamentary elections, but failed to secure an absolute majority.
Short-term impact on the euro:
The result gave the euro a temporary boost in appeal, as the diminished immediate threat of extreme fiscal policy gave investors some relief, which led to a short-term rise in the currency.
Future considerations:
The crucial second-round runoff election on July 7 remains a crucial event. If the RN wins, the eurozone could face fresh pressures due to concerns about possible radical policy changes.
2. Outlook for monetary policy in the euro area and the US:
European Central Bank (ECB) rate cut forecast:
Weak German inflation data has fuelled speculation that the ECB may consider cutting interest rates, as lower inflation suggests less pressure to keep interest rates high, making a cut more likely.
Federal Reserve (Fed) Rate Cut Forecast:
Similar expectations of a rate cut by the Federal Reserve have emerged in the United States, where declines in other economic indicators such as the Core Personal Consumption Expenditures (PCE) Price Index and the ISM Manufacturing PMI suggest a rate cut is likely in September.
Currency impact:
These shifts in monetary policy expectations are leading to a weakening of the US Dollar (USD), while the Euro is simultaneously strengthening as investors adjust their positions based on the central bank's anticipated actions.
3. US Nonfarm Payroll Data and its Impact on the USD:
June Nonfarm Payrolls Projections:
June nonfarm payroll data will be closely watched as it is expected to show a moderate increase in employment compared to the previous month.
Potential impact on the US Dollar:
The outcome of this report will have a significant impact on the US Dollar. A strong report showing solid job growth could lead to a stronger US Dollar. Conversely, a weak report could further weaken the currency, adding to the pressure already affecting the US Dollar from other economic data and monetary policy outlooks.
Major economic events this week:
Consumer Price Index (CPI) (EUR) – 1 July 2024, 12:00
Impact: High
Description: The Consumer Price Index (CPI) measures the change in prices of goods and services from the consumer's perspective. It is an important indicator of inflation. Higher inflation rates may lead to a tightening of monetary policy by the European Central Bank (ECB) and strengthen the Euro. Conversely, a lower than expected CPI reading may lead to more accommodative policies.
ISM Manufacturing PMI (USD) – 01 July 2024, 14:00
Impact: High
Description: The Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) is a key indicator of the economic health of the U.S. manufacturing industry. A PMI above 50 indicates economic expansion and a PMI below 50 indicates economic contraction. This data influences the U.S. dollar and provides insight into economic conditions and business sentiment.
Speech by ECB President Lagarde (Euro) – 1 July 2024, 19:00
Impact: High
Description: European Central Bank (ECB) President Christine Lagarde's speech is being closely watched by investors and analysts for hints about future monetary policy. Her remarks could affect the value of the euro, especially if she provides new information on interest rates, inflation, and the economic outlook.
RBA Minutes (AUD) – 2 July 2024 01:30
Impact: High
Description: Reserve Bank of Australia (RBA) meeting minutes provide detailed information about the central bank's latest policy decisions. Investors look for clues about future monetary policy, interest rate changes, and the state of the economy. Minutes can have a significant impact on the Australian Dollar (AUD) based on the tone and content of the discussions.
Nonfarm Payrolls (USD) – 05 July 2024, 12:30
Impact: High
Description: The Nonfarm Payrolls report is a key indicator of the U.S. labor market, measuring the change in the number of employed persons excluding the farm sector from the previous month. It is closely watched as it influences the Federal Reserve's monetary policy decisions. A strong report can strengthen the U.S. dollar, while a weak report can lead to a weakening of the currency.
The subject matter and content of this article are solely the views of the author. FinanceFeeds assumes no legal responsibility for the content of this article, nor do they reflect the views of FinanceFeeds or its editorial staff.
This information does not constitute advice or a recommendation for any course of action and does not take into account your personal circumstances, financial situation or individual needs. We strongly recommend that you seek independent professional advice or conduct your own independent research before acting on the information contained in this article.
