Euro weekly forecast

The Euro started the week by reaching multi-week highs against most G10 currencies after the first round of the French election showed less support for the far-right National Rally than some polls had predicted.

However, on Tuesday we did see the single currency come under pressure following the release of the Eurozone's preliminary consumer price index for June. Headline inflation eased from 2.6% to 2.5% in June, increasing expectations for additional interest rate cuts from the European Central Bank (ECB).

In the middle of the week, the single currency was weakened by a mix of domestic data. The Eurozone's final services PMI was revised slightly higher; however, producer price inflation cooled. This fueled market speculation about further ECB interest rate cuts, ultimately restraining the Euro during mid-week trading.

On Thursday, the Euro showed little reaction to a slowdown in Germany's latest factory orders, as the ECB's meeting minutes revealed that not all policymakers favored an interest rate cut during its last decision meeting.

The Euro did however, end the week on a weak note as slower-than-expected retail sales growth weighed on the EUR.

With sparse Eurozone data scheduled for this week, EUR exchange rates may face challenges in establishing a clear direction for most of the week.

However, Monday will confirm France’s final round of elections, where the political left has formed an alliance to prevent National Rally from gaining a majority. While a loss for National Rally initially brings stability to the Euro, the NFP is composed of diverse political parties spanning the political spectrum, which may lead to friction as France faces a hung parliament. Additionally, reports suggest the NFP aims to overturn President Macron's pro-market reforms, signaling a prolonged period of uncertainty for the Euro ahead.

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