The first week of July brings is what has the potential to be a very volatile week with both UK and French elections on the cards (Alongside a very busy economic calendar). On Sunday the first round of voting begun, unfortunately, I am writing this while votes are still being cast, so we will not know how things pan out until markets open on Monday morning. Essentially the potential scenarios come down to who wins the vote and by how much they win it. The votes will also continue into the second round next week where we will then have final results.
Markets are expecting Marine Le Pen’s RN party to have a strong lead in the polls, which would essentially mean a hung parliament, this is the expected outcome currently and would not have a major effect on the Euro as a whole as I do not believe it will disrupt any economic plans for France. If however, the RN party secutres an outright majority, then we could see the Euro weaken and French equities sell off and would be a massive risk event for European assets as a whole. If the NFP were to win the election (Unlikely scenario) then I would expect to see the GBPEUR shoot up, but as I said this quite an unlikely scenario, we just can’t rule it out yet.
The UK election on Thursday so far has not brought any volatility into UK FX or equities, and generally I expect it to remain this way, polls are leaning towards a Labour majority, and with PM Keir Starmer’s policy being relatively centre, markets do not see this as a risk- we would only see the Pound weaken if we were to see no political majority at all and a hung parliament, this would send Sterling spiralling downwards, but this does seem highly unlikely for this election.
Aside from politics- please see below for the main events on the economic calendar this week that are worth noting-
Monday-
- UK House prices data
- EUR Manufacturing PMI
- UK Mortgage approvals
- Germany Inflation Rate
- U.S ISM Manufacturing PMI
Tuesday-
- EUR Core inflation rate
- Fed Chair Powell Speech
Wednesday-
- EUR PMI
- UK PMI
- US PMI
- FOMC Minutes
Friday-
- EUR Retail sales
- U.S Non farm payrolls
- U.S Unemployment