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Far right leads first round of French parliamentary elections

He Marine Le Pen’s far-right National Rally (RN) party is projected to have won with 34% of the vote in the first round of France’s parliamentary elections on Sunday, according to initial projections, CNN reported.

Meanwhile, the centrist alliance of French President Emmanuel Macron was the big loser, coming in third place with 20.3% of the votes. The leftist New Popular Front (NFP) coalition came in second with 28.1% of the vote.

According to its projections, the extreme right would win between 230 and 280 seats in the National Assembly, falling short of the 289 seats necessary for an absolute majority.

Market players will be attentive to the second round of the elections on July 7. The RN will try to win an absolute majority to lead the National Assembly without the need for coalition partners.

Market reaction to the 2024 French elections

At press time, the EUR/USD was up 0.20% on the day at 1.0735.

Euro FAQs

The Euro is the currency of the 20 European Union countries that belong to the Eurozone. It is the second most traded currency in the world, behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB), based in Frankfurt, Germany, is the reserve bank of the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s main mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main instrument is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – generally benefit the Euro and vice versa. The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the national banks of the Eurozone and six permanent members, including ECB President Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), are an important econometric data for the euro. If inflation rises more than expected, especially if it exceeds the 2% target set by the ECB, it is forced to raise interest rates to bring it back under control. Relatively high interest rates compared to their peers tend to benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases measure the health of the economy and can influence the Euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment, but it may encourage the ECB to raise interest rates, which will directly strengthen the Euro. Conversely, if economic data is weak, the Euro is likely to fall. The economic data for the four largest economies in the eurozone (Germany, France, Italy and Spain) are especially significant, as they represent 75% of the eurozone economy.

Another important output for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly sought-after export products, its currency will appreciate due to the additional demand created by foreign buyers who wish to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.

Source: Fx Street

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