Skip to content

8th July 2024 | Markets digest outcome of the UK and French elections

This week’s headlines:

  • French Election Sees Hung Parliament: The French election has seen the left wing NPF (New Popular Front) poll top but fall short of a majority. Markets now await more details on who will be the new French Prime Minister and how the Euro will react.
  • Softer US Jobs Data Sees Weaker Dollar: Last week’s US data pointed to a softening in the US labour market which might bring forward prospects of an interest rate cut, typically weakening the currency concerned.
  • UK Economic Growth a Focus For The Pound This Week: Thursday is the latest UK GDP data, which may well influence expectations on when the UK might look at its own interest rates cuts, a potential market mover for the pound.

In-Depth Report:

The week ahead will see a mixture of political and economic themes driving market sentiment. The results of the French election indicate a surprise victory for the left-wing New Popular Front, although they fell short of a majority. Attention will now be on just who will become Prime Minister in France and what kind of coalition can be formed. The Euro could prove reactive to the latest twists and turns here as France is the Eurozone’s second largest economy.

The chairman of the US Federal Reserve, Jerome Powell will give a series of speeches which could move the US dollar and thereby influence FX market movements this week. Last week’s US Non-Farm Payroll report showed a decline from the previous month in the number of new jobs being created, with downward revisions on past months too. The US unemployment rate has also risen to 4.1%, prompting attention on the US central bank and when they might cut interest rates.

For the UK, we get the latest GDP (Gross Domestic Product) data, which should point to solid economic growth in the 2nd quarter of this year. Sterling has been supported for much of 2024 on the expectation the Bank of England is in no rush to cut interest rates. According to market predictions, the first cuts are scheduled for the Autumn. Will the latest data this week change that expectation? Any deviation from the forecasted 0.2% in May could result in movement for sterling exchange rates.

For GBPEUR levels, the FX markets continue to digest the outcome of the UK election and the French election, to better understand what the new governments will mean for economic policy ahead. The pound remains less than one cent off the highest levels since August 2022 against the Euro offering a buying opportunity at near the highest points over this period. Speak to our knowledgeable and friendly team to continue to be updated on these historic events and how they might shape your exchange rate ahead.