The Euro Tanks Following Eurozone Political Uncertainty
GBP
GBP/USD has dropped and is currently trading at 1.2715 (interbank). GBP/EUR is at 1.1815 (interbank), marking its highest level since August 2022.
This week, the opposition Labour Party is set to unveil its manifesto ahead of the July 4 election. While polls indicate Labour may lead over Prime Minister Rishi Sunak's Conservatives, some business leaders question Labour's ability to reverse Britain's recent sluggish growth.
Investors will closely monitor the upcoming U.K. jobs report on Tuesday to assess whether wage pressures are easing quickly enough to prompt a near-term rate cut by the Bank of England.
Previously, economists anticipated a rate cut in June, but persistent inflation pressures have pushed back market expectations for a move until November.
Additionally, April GDP data expected on Wednesday may indicate softened growth following a robust 0.6% expansion in the first quarter.
No significant events are scheduled for today
EUR
EUR/USD has significantly declined since last week and is now trading at 1.0751 (interbank), nearing a one-month low.
The euro's decline follows French President Emmanuel Macron's announcement of a surprise legislative election after his party's defeat in the European Union vote by the far-right. Macron's decision poses a significant risk to his political future, with the possibility of Marine Le Pen's far-right National Rally (RN) party gaining a parliamentary majority.
Eurosceptic nationalists made notable gains in the European Parliament elections, while the Greens and liberals experienced losses.
In Italy, exit polls showed Prime Minister Giorgia Meloni's arch-conservative Brothers of Italy group winning the most votes, solidifying its position as the country's most popular party.
No significant events are scheduled for today
USD
The dollar index, which measures the currency against other major currencies, is currently near a four-week high at 105.30.
Friday's U.S. employment data revealed accelerated job and wage growth in May, leading markets to adjust expectations for rate cuts this year, with the first rate cut now anticipated in September.
This week, all eyes will be on Wednesday's conclusion of the Fed's two-day policy meeting, where interest rates are widely expected to remain unchanged. Investors will also focus on signals from officials regarding future rate cuts for the remainder of 2024.
Wednesday will also see the release of May's inflation figures just ahead of the Fed statement, which could further influence expectations for rate cuts, especially amid signs of economic weakness.
No significant events are scheduled for today
CAD
Last Friday, the Canadian economy added a modest 27,000 jobs in May, with a slight uptick in unemployment to 6.2%. Economists had expected an average of 30,000 jobs to be added, with part-time employment showing an increase of 62,000 positions while full-time employment declined by 36,000 jobs.
Brent crude has seen a slight increase to $79.77 a barrel, and West Texas Intermediate crude (WTI) has also risen to $75.38 a barrel.
This week, BoC governor Tiff Macklem is scheduled to participate in a panel at the Conference of Montreal on Wednesday, and deputy governor Sharon Kozicki will deliver a speech to the Canadian Association for Business Economics in Ottawa on Thursday.
Statistics Canada is set to release national balance sheet and financial flow accounts figures for the first quarter on Thursday. Additionally, Canada will release monthly survey data on manufacturing and wholesale trade figures for April on Friday.
No significant events are scheduled for today
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