Euro extends gains with eye on French election

The euro has posted gains connected Thursday and is trading astatine 1.0812 successful the European session, up 0.26% connected the day. It has been a bully week for EUR/USD, which has gained 0.95% and deed a three-week precocious connected Wednesday.

Will Le Pen snag a majority?

France heads for the polls connected Sunday for the 2nd circular of parliamentary elections. Mary Le Pen’s far-right enactment is expected to beryllium the largest enactment successful parliament, but the cardinal question if unneurotic with different rightist parties she tin triumph a bulk and power parliament. If Le Pen does triumph a majority, it volition people a stunning decision for French President Macron and could trigger turmoil successful the fiscal markets.

The European Central Bank is staying neutral successful the French predetermination but is undoubtedly disquieted astir the fallout from a Le Pen victory. ECB President Lagarde hosted the ECB forum successful Portugal this week and focused connected ostentation and complaint policy. Lagarde said that the ECB was “very precocious successful that disinflationary path” and that the 2% ostentation people could beryllium achieved by the 4th fourth of 2025.

Lagarde added that the roadworthy to the 2% people would beryllium “bumpy” for the remainder of 2024 and the ECB would stay cautious regarding further complaint cuts. The ECB made a large displacement successful argumentation successful June, delivering its archetypal complaint chopped since 2019.

Fed remains cautious astir complaint path

The Federal Reserve released the FOMC minutes connected Wednesday and the connection was 1 of caution. The minutes said that “price pressures were diminishing” and noted the slowdown successful wage growth. Still, Fed officials were not yet assured that ostentation was moving sustainably towards the 2% ostentation target. This message, which echoed Fed Chair Powell’s remarks astatine the ECB forum earlier this week, indicated that the Fed remains hesitant astir lowering rates. The markets person priced successful a quarter-point chopped successful September astatine 66%, up from 59% 1 week ago.
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EUR/USD Technical

• There is enactment astatine 1.0781 and 1.0744
• 1.0825 is simply a anemic absorption line. Above, determination is absorption astatine 1.0862

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