The euro is steady on Monday. EUR/USD is trading at 1.0714 in the North American session, up 0.10% on the day.
French election triggers market turmoil
France’s financial markets took a tumble late last week, as investors are nervous about the snap parliamentary election at the end of June. There are fears that the extreme right could make strong gains, as was the case in the recent European Union parliamentary elections. The market turmoil led to a sell-off in France’s financial markets and the euro losing 1% over Thursday and Friday.
ECB Chief Economist Philip Lane sought to reassure nervous investors and said on Monday that the ECB would not intervene since the recent market turmoil was “not disorderly”. Lane also said the ECB was confident that inflation would fall to the 2% target in 2025.
Lane may have sounded optimistic, but the ECB was not happy with the June CPI release, which showed inflation accelerating in the preliminary estimate. Headline CPI rose from 2.4% in May to 2.6% in June and the core rate climbed to 2.9%, up from 2.7% in May. The final estimate, which will released on Tuesday, is expected to confirm the initial release. The markets expect one or two rate cuts before the end of the year, but higher inflation will complicate the ECB’s plans to lower interest rates.
In the US, the UoM consumer sentiment index fell for a third successive month to 65.6 in June. This was down from 69.1 in May and shy of the market estimate of 72. Inflation expectations remained unchanged at 3.3%, another signal that inflation remains sticky and the Fed will have a tough time bringing inflation down to the 2% target.
EUR/USD Technical
- EUR/USD is testing resistance at 1.0709. Above, there is resistance at 1.0743
- 1.0666 and 1.0628 are the next support levels.
