Currency news

GBPEUR at 22-month highs

Head of FX Analysis at Equals Money
-
3
min read
Publish date
10/06/24
    • Macron calls for snap election in France
    • Friday's job numbers encourage USD demand


    Currency recap

    The euro has weakened early doors as investors weighed the fallout from the European Parliament elections over the weekend, with French President Emmanuel Macron and German Chancellor Olaf Scholz suffering defeats in the polls. The outcome led Macron to call a snap election being called in France on 30th June and 7th July, in a bid to stop the rise of his far-right rival, Marine Le Pen.

    Friday's job numbers threw a spanner in the works of recent soft numbers from the US, with non-farm payrolls showing 272,000 jobs were added in May, and average hourly earnings grew by 4.1% from the previous year. Treasury yields soared, and USD gained as markets reduced the number of rate cuts expected by the Fed this year to just the one. Last month's weaker job numbers incited a month long sell of the USD, will we now see the opposite in June?

    Today's GBP rates

    Currency pair Daily move* Indicative rate**
    GBPAUD 0.73% 1.9328
    GBPCAD 0.10% 1.7502
    GBPCHF 0.24% 1.1403
    GBPDKK 0.22% 8.7824
    GBPEUR 0.22% 1.1773
    GBPJPY 0.07% 199.2280
    GBPNOK 0.85% 13.6182
    GBPNZD 0.96% 2.0831
    GBPSEK 0.90% 13.4104
    GBPUSD -0.50% 1.2725


    *Daily move - against G10 rates at 7:30am, 10.06.24

    ** Indicative rates - interbank rates at 7:30am, 10.06.24

    Key data points

    Currency Event Period Consensus Previous
    N/A None Today. N/A N/A N/A

    Upcoming speeches

    • None today.

    What we think

    GBPEUR is currently trading at the highest levels since August 2022 following the snap election being called in France. The most likely outcome seems to be that Macron’s party and its allies will lose seats, but will remain the largest force in Parliament. Nonetheless we will continue to monitor the political risk premium attached to the EUR.

    A busy week ahead with Wednesday set to take the headlines with regards to USD. In the afternoon we have the release of May's CPI numbers, expected to show further easing of inflation with the core numbers expected to move from 3.6% to 3.5%. The Fed are not expected to cut rates in the evening's Fed meeting, so focus will fall on the revised dot plot. March’s dot plot saw the Fed projected interest rates falling to 4.625% from the current 5.5%. However, you only have to look at money markets pricing in one rate cut this year to see that it seems more than likely the Fed will raise their projections on the dot plot. Combination of higher CPI and a more hawkish Fed will likely add to further USD gains.

    UK numbers last month saw the markets pushing back when they expect the BoE to cut rates, going against the BoE guidance at the start of the month, suggesting that we would see a rate cut in the summer. Should Tuesday morning's job number come in strong then we could well see markets push back the first rate cut to December, further enhancing gains for GBP.

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    About the author
    Thanim Islam
    Profile
    Head of FX Analysis at Equals Money

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