EURUSD falls as French President Macron’s call for a hasty election threatens political stability.

EURUSD falls to 1.0750 during Monday’s European session. The major currency pair falls as political instability in the Eurozone follows French President Emmanuel Macron’s demand for a snap election, weighing hard on the Euro. Macron’s surprise action on Sunday evening came as exit polls indicated that Marine Le Pen’s far-right National Rally (RN) secured 32%-33% seats in European parliamentary elections under the leadership of the party’s president, Jordan Bardella more than doubled from Macron’s centrist list.

Following the stunning declaration of a snap election, Macron stated: “I am confident in our democracy and in allowing the sovereign people to have their voice. “I have heard your message and concerns, and I will not leave them unanswered,” The Guardian stated. However, there may be implications if Macron’s party suffers more losses than exit polls predict, increasing doubt about the Euro’s fate.

European Central Bank (ECB) policymaker and President of the Deutsche Bundesbank, Joachim Nagel, warned of a persistent inflation forecast.

On the monetary policy front, European Central Bank (ECB) policymaker and President of the Deutsche Bundesbank, Joachim Nagel, warned of a persistent inflation forecast, particularly in the service sector, owing to strong wage increases. Worries about inflation becoming sticky indicate that the policy-easing campaign will be sluggish.

During the European session, ECB policymakers Slovakian Central Bank Governor Peter Kazimir also stated that the central bank should not hurry into another rate decrease because progress in disinflation could be shaky. However, Kazimir maintains optimistic that the ECB is on track to meet its goal.

ECB President Christine Lagarde stated in the monetary policy press conference after cutting the central bank’s Deposit Facility Rate by 25 basis points (bps) to 3.75% that the bank is not committing to a specific interest-rate path and will remain data-dependent as inflation may remain volatile in the coming months.

Daily Market movers: EURUSD plunges amid caution ahead of US CPI and Fed policy decision.

EURUSD falls to 1.0750 due to a weak euro amid political uncertainties and a strong US dollar (USD). United States (USA) Labor market data has reduced market expectations for the Federal Reserve (Fed) to begin lowering interest rates from their current levels at its September meeting. The US Dollar Index (DXY), which analyzes the US dollar’s value against six major currencies, has recovered to a nearly four-week high of 105.30.
According to the CME FedWatch tool, 30-Day Fed Funds futures price statistics indicate a 47% chance that interest rates will be lower than they are now in September, a considerable decrease from 59.6% a week earlier.

Strong US job market data reduces Fed rate-cut predictions, boosting the US dollar’s appeal.

The US Nonfarm Payrolls (NFP) data for May indicated on Friday that new hires came in at 272K, exceeding predictions of 185K and the previous release of 165K. Labor demand, which remains better than predicted, continues to buy time. Fed policymakers should preserve their existing interest rate framework.
Average hourly earnings data, a measure of wage inflation that influences household spending, came in higher than predicted. Annual wage inflation measures rose to 4.1% in May, exceeding the consensus of 3.9% and the April reading of 4.0%. On a month-to-month basis, wage inflation measures increased by 0.4%, exceeding expectations of 0.3% and the previous release of 0.2%.
Meanwhile, investors are looking ahead to the US Consumer Price Index (CPI) data for May and the Fed’s monetary policy announcement on Wednesday. The Fed is widely expected to leave interest rates unchanged in the range of 5.25%-5.50%, with a hawkish view as the final mile to return inflation to the desired rate of 2% seems to be stickier.