The euro gained, and Paris shares soared Monday on expectations that France’s far-right would not win enough seats to form an overwhelming majority in legislative elections.
The single currency has been under pressure in recent weeks because to concerns that Marine Le Pen’s National Rally (RN) will win and implement big-spending policies that will put the country at odds with the European Union.
However, while surveys indicated that the party was on track to win the most seats in the 577-member National Assembly, it was uncertain whether it would be enough to gain complete control.
President Emmanuel Macron has called for a “broad” alliance against the far-right in the second round, which would include run-off votes if there was no clear winner in the first round.
The euro reached a high of $1.0777 on Monday, with some forecasting that it will increase further if other parties engage in horse trading to restrict the RN’s gains. Paris’ CAC 40 index began 2.7% higher, while Frankfurt and London were also up.
“We have seven days to spare France from catastrophe,” said Raphael Glucksmann, a senior participant in the left-wing alliance.
The yen, meanwhile, kept its ground versus the dollar as the Federal Reserve’s favored inflation gauge, the personal consumption expenditures (PCE) index, fell further in May.
The figure fueled renewed hope that the Fed will lower interest rates this year, while traders gambled on the Bank of Japan raising borrowing costs at its next meeting. Traders are now anticipating the publication of critical nonfarm payroll data at the end of the week.
“The door to a September cut is wide open, but three payrolls and three (consumer price indexes) ahead for the September meeting still need to go by without giving (decision-makers) too much to be nervous about,” Taylor Nugent, an economist at National Australia Bank, said.
Traders are keeping a tight eye on forex market movements after Japanese officials said they were prepared to intervene to support the yen if it continued to fall. The currency is trading close below 161 per dollar, having hit a 38-year low last week.
