Strengthening of the euro due to the party of Marine Le Pen | 01 July 2024

Event to pay attention to today:

17:00 GMT+3. USD - ISM Manufacturing PMI

EURUSD:

The EUR/USD currency pair has risen for the third consecutive day, trading around the 1.0750 mark during Asian hours on Monday. Speculation that the US Federal Reserve (Fed) may cut interest rates in 2024 is exerting downward pressure on the US dollar (USD), thereby supporting the EUR/USD currency pair.

On Friday, the US Bureau of Economic Analysis reported that US inflation fell to its lowest annual rate in three years. The Personal Consumption Expenditure (PCE) price index increased by 2.6% year-on-year in May, up from 2.7% in April. This was in line with market expectations. Core PCE inflation also rose at an annualised rate of 2.6% in May, up from 2.8% in April. This was in line with forecasts.

On Friday, Federal Reserve Bank of San Francisco President Mary Daly stated that monetary policy is working. However, it is too early to say when it will be appropriate to cut interest rates. Daly stated that if inflation remains stable or declines slowly, rates will have to be raised longer.

In France, the euro strengthened as Marine Le Pen's Rassemblement Nationale (RND) party reaffirmed its status as the country's leading political force in the first round of legislative elections, which saw the highest turnout in three decades. According to France 24, Le Pen's party won a clear but not decisive victory, leaving the outcome of the election uncertain ahead of the second round of voting on 7 July.

On the monetary policy front, European Central Bank (ECB) Governing Council member Olli Rehn said last week that the central bank could cut interest rates two more times this year. The latest data revealed that annual inflation in France slowed to 2.5 per cent, in line with expectations. In Spain, inflation fell to 3.5 per cent, slightly above expectations. In contrast, inflation in Italy accelerated to 0.9 per cent, as expected.

Trade recommendation: Trading predominantly Buy orders from the current price level.

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