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What’s happening: The euro recorded losses on Monday, as investors assessed the results of the European Parliament elections.
What happened: French President Emmanuel Macron called a snap parliamentary election following significant gains by the far right in a European Union vote.
Strength in the US dollar also exerted pressure on the EUR/USD forex pair during Monday’s session.
Why it matters: France’s right-wing populist party National Rally won 31.5% of the votes, while Chancellor Scholz’s Social Democrats dropped to third place in Germany, behind the far-right Alternative. Eurosceptic nationalists saw the biggest gains in the European Parliament elections.
In a bid to re-establish authority, Emmanuel Macron called a parliamentary election, in which voters will choose a new Prime Minister with a first round on June 30 and the second scheduled to take place on July 7.
Strength in the greenback also exerted pressure on the EUR/USD forex pair. The US dollar moved higher following the NFP (non-farm payrolls) report showing higher-than-expected new job additions in May. Wages also increased more than projected, which lowered speculations of the Federal Reserve slashing interest rates soon.
The Labor Department said nonfarm payrolls increased by 272,000 in May, the most in five months, while the average hourly earnings rose by 0.4% to $34.91. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 105.15 on Monday.
The EUR/USD forex pair fell around 0.4% to 1.0767 on Monday, after dipping to as low as 1.0733 to record its weakest level since May 9. The EUR/GBP also declined to near a two-year low.
What to watch: Uncertainty around the elections could trigger higher volatility in the forex market. Data on US inflation and the Federal Reserve’s monetary policy announcement are scheduled for Wednesday.
Analysts expect the US headline consumer price inflation to slow to 0.1% in May, from 0.3% in the previous month.
Context: British stocks settled lower on Monday, tracking losses in the European share markets.
Details: This is a big week for the UK, with several major economic reports scheduled for release, which could give direction to the Bank of England’s monetary policy moves. Data on British wages, unemployment rate and GDP will be released this week.
Most sectors settled in the negative zone on Monday, amid political uncertainty in Europe due to the European Parliament elections. Beverages stocks were among the worst performers, falling more than 2%. Energy stocks bucked the overall market trend, adding more than 1% on a sharp surge in oil prices.
Shares of ME Group International fell around 4.5% on Monday, despite the company indicating that it would meet its profitability projections for the full year. Aviva’s shares declined more than 2% after JPMorgan analysts downgraded their rating on the stock.
London’s FTSE 100 fell 0.20% to settle at 8,228.48 on Monday, following a 0.5% decline on Friday. The more domestically focussed FTSE 250 Index also declined 0.53% to close at 20,446.04.
The STOXX Europe 600 Index shed 0.27% to close at 522.16 on Monday.
What to watch: Investors await the release of data on the UK’s unemployment rate, employment change, average earnings, claimant count change and HMRC payrolls change. The UK’s unemployment rate, which increased to 4.3% from January to March, is expected to remain at 4.3% in April. Analysts expect average weekly earnings including bonuses to rise 5.7% year-over-year, unchanged from the previous month. The number of people claiming jobless benefits, which increased by 8,900 in April, is expected to rise by 10,200 in May.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.18%, 0.26% and 0.39%, respectively.
In the European Parliament elections, significant gains were made by far-right parties, which are against supporting Ukraine in its war with Russia. The news sent the safe-haven US dollar index higher in forex trading this morning.
South Korea posted a current account deficit of $0.29 billion in April, versus a surplus of $6.93 billion in the prior month, exerting pressure on the KRW/USD forex pair.
Russia’s budget deficit shrank to ₽ 983 billion in the January to May period, versus ₽ 3 trillion in the year-ago period, sending the RUB/USD pair higher in forex trading this morning.
Saudi Arabia’s industrial production fell by 6.1% year-over-year in April, lower than the 8.7% decline recorded in March, which lent support to the SAR/USD forex pair.
Turkey’s current account deficit widened to $5.29 billion in April, from $5.09 billion in the year-ago month, which sent the TRY/USD pair lower in forex trading this morning.
Japan’s machine tool orders, Turkey’s retail sales, South Africa’s manufacturing production, Brazil’s inflation rate, Mexico’s industrial production, Canada’s value of building permits, US Redbook index, Russia’s balance of trade, China’s vehicle sales, as well as US NFIB small business optimism index and API crude oil inventories.
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