Euro up slightly in early trading following French election

The Euro is up a bit over 0.5% to 1.0770 versus the Dollar in this mornings trading. Sterling is also up slightly versus the Dollar, to about 1.2680, leaving the euro up about 0.3% against sterling to £0.849. The dollar versus Yen rate, the focus of much market attention of late was broadly unchanged since Friday, trading at just over Y161 – the market will continue to be on guard regarding the possibility of intervention by the Japanese authorities.

In France the election results confirmed what the polls had been indicating, with the right wing RN party of Marine Le Pen winning the largest share of the vote. The left wing block came second, with President Macron’s party beaten into third place. There will be now be a second round of voting, with the possibility that electoral agreements between the left wing and Macron’s party may eat into the RN’s seat tally. As such a hung parliament looks like a distinct possibility. The French 10 year bond yield is not much changed despite the election results, trading at close to 3.25%. The French stock market, the CAC40, has opened with gains of over 2.5% this morning.

In the US PCE inflation came in in-line with expectations for May. Headline inflation on this measure came in at 0% month-on-month and 2.6% on an annual basis. Core PCE inflation was 0.08% m-on-m and the y-on-y rate declined to 2.6%. Personal income rose a healthy 0.5% on the month, though consumer spending was a bit lower than this at 0.2% m-on-m, as a result the savings rate rose a touch.

In terms of other data the University of Michigan Consumer Sentiment came in at 68 for June, down marginally on 69 in May, though a touch above expectations. UK Nationwide house prices rose 0.2% in June in month-on-month terms, and was up 1.5% on an annual basis, picking up from 1.3% in May. The German unemployment rate rose 0.1pp to 6% in May, a touch above consensus expectations.

Today we have German inflation data as well as credit and mortgage approvals data for the UK. Later on we have the ISM data for the US. ECB President Lagarde is also speaking.

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