Market Analysis

EUR/USD surged by 0.50% to reach a two-week high near 1.0770 during Monday’s European session. The rise came on the heels of initial results from France's parliamentary elections, showing Marine Le Pen's far-right National Rally (RN) in a strong position but with a narrower lead than expected. This outcome reduced uncertainties and bolstered the Euro's attractiveness amid a significant decline in the US Dollar (USD).

Carol Kong, a currency strategist at Commonwealth Bank of Australia, noted, "There might be less concern about expansive fiscal policies if the far-right performs slightly weaker."

Investor focus now shifts to the second-round runoffs scheduled for July 7.

Monetary policy remains a key concern, with attention on signals from the European Central Bank (ECB) regarding potential rate cuts. After maintaining high rates to counter pandemic-driven inflation, the ECB began easing in early June.

Today, all eyes are on Germany's preliminary Harmonized Index of Consumer Prices (HICP) data for June, expected at 12:00 GMT. Economists anticipate a slight moderation in annual HICP to 2.6% from 2.8%, while monthly Consumer Price Index (CPI) growth is forecasted to accelerate to 0.2% from 0.1% in May.

A sharper-than-expected decline in German inflation could heighten expectations for earlier ECB rate cuts, whereas strong inflation figures might temper these expectations.

Looking ahead, Tuesday’s release of Eurozone HICP data for June will be a critical event shaping Euro sentiment.

Technical analysis indicates that EUR/USD bounced back after finding strong support near the upper boundary of a Symmetrical Triangle formation on the daily chart, formed since October 2023. However, the pair remains below the 200-day Exponential Moving Average (EMA) near 1.0790, suggesting a bearish overall trend. The 14-period Relative Strength Index (RSI) indicates market indecision, oscillating between 40.00 and 60.00.

Paraphrasing text from "Reuters" all rights reserved by the original author.