Euro fell in European trade on Monday away from three-week highs against the US dollar and on track for the first loss in eight days on profit-taking and after the surprise of the final round of French parliamentary elections.
France’s leftist New Popular Front won the most votes in a surprise result, however it failed to gain an absolute majority.
The far right group the National Front surprisingly came in third place, with Emanuel Macron’s centrist at second place.
The result is a hung parliament, which complicates the political situation, and will likely result in little legislative progress.
The Price
The EUR/USD fell 0.4% today to $1.0799, with a session-high at $1.0838.
The pair rose 0.25% on Friday, the seventh profit in a row, marking a three-week high at $1.0843 following weak US labor data.
The EUR/USD pair rose 1.2% last week, the second weekly profit in a row, and the largest this year.
The massive gains came amid hopes for a shrinkage of the European-US interest rate gap during the second half of the year.
French Elections Surprises
The final round of French parliamentary elections netted a few surprises, with the leftist New Popular Front gaining the most votes, followed by Emanuel Macron’s centrist in second place, then the far right National Front group in third place, with no party gaining an absolute majority.
The vote is a humiliating defeat for the National Front after the initial round showed promise of a first place position.
Hung Parliament
The French parliament is now hung and composed of three major factions, all extremely opposed to one another.
Analysis
Investors will remain concerned that the leftist coalition will try to undermine Macron’s economic reform legislation, and could lead to a deteriorating debt crisis.
France’s government debt reached 110.6% of total GDP in 2023.
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