Euro US dollar (EUR/USD) exchange rate muted amid French political turbulence
The euro US dollar (EUR/USD) exchange rate is trading in a narrow range today, amid continued French political uncertainty.
At the time of writing, EUR/USD is trading at US$1.0730, showing little movement from the morning’s opening rates.
Euro (EUR) muted amid French political uncertainty
The euro (EUR) is enduring tepid trade this morning, as a lack of fresh data releases keeps investors focused on French political developments.
The far right National Rally party may be serving to keep the euro underpinned today. The party announced yesterday that it would remain committeed to observing France’s existing rules for budgeting.
This likely came as a response to the leftist New Popular Front, who stated that it planned to increase public spending. With both parties aiming to take France in contrasting economic directions, a lack of clarity could be serving to keep the euro softened.
However, although the first round of voting is due this weekend, it remains early days for any party to make significant concessions. Furthermore, New Popular Front are expected to perform above previous forecasts.
Due to the potential split across the political spectrum in France’s government, the euro may remain capped today.
US Dollar (USD) lacks direction as markets await data
The US dollar (USD) is trading without a clear direction this morning, as markets await the latest US consumer confidence data.
In June, consumer sentiment is forecast to have slipped from a reading of 102 in May down to 100, which could undermine USD.
Due to the American economy’s consumption driven nature, any sign of fading confidence could prove unsettling for investors. Furthermore, fading confidence may be indicative of future slowdowns in spending.
This may push the Federal Reserve to cut interest rates sooner in order to alleviate some pressure on households. Any increased rate cut bets could weaken the ‘greenback’ later in the session.
Later in the session, two Federal Reserve officials are due to speak. Dr Lisa Cook and Michelle Bowman are set to give remarks, and any indication of interest rate cuts could dampen USD.
However, if they both strike a hawkish tone, the ‘greenback’ could strengthen amid pared back interest rate cut bets.
Euro US dollar exchange rate forecast: German data in focus
Looking ahead for the euro, the core catalyst of movement is likely to be the latest German GfK consumer confidence data.
Due for publication tomorrow, the reading is forecast by economists to show a slight decrease in pessimism amongst German households. The index is expected to print at -18.9, an increase from a reading of -20.9 in May.
As this is expected to remain deeply negative, any positive impact on the euro is likely to be limited. The Eurozone’s largest economy looks likely to continue sputtering along, which may weigh on the common currency.
This is followed by a speech from European Central Bank (ECB) Chief Economist Philip Lane. If Lane remains coy about the timing of future interest rate cuts, EUR may strengthen.
For the US dollar, investors may focus on the final GDP growth rate reading for the first quarter of 2024. If this confirms a significant slowdown in economic activity, USD may struggle.
