(News Bulletin 247) – The single currency continues to fall below $1.08, to a one-month low following the result of the European elections. The euro is also under pressure against the greenback before the Fed’s monetary policy meeting.

The European elections have taken an unexpected turn. At the end of this election, the President of the Republic Emmanuel Macron took the decision to dissolve the National Assembly. This surprise announcement did not fail to bring uncertainty about the future parliamentary majority, with the specter of possible political cohabitation, which put pressure on many markets.

The yield on the 10-year French bond rises sharply to 3.192% against 3.103% on Friday, when the CAC 40, the flagship barometer of the Paris Stock Exchange, plunges by 2.20% to 7,834.02 points, to land at a three-month low.

This shock wave also spread, to a lesser extent, to the currency market, and in particular the euro which is starting the week in decline. The euro lost 0.4% to 1.0758 dollars, falling to a one-month low against the greenback.

“On the currency front, the fall of the euro against the dollar by around 0.5% does not reflect general panic, contrary to what we saw during the debt crisis in the euro zone by example, but a certain distrust”, would like to temper Alexandre Baradez, head of market analysis at IG France.

The impact of the European elections on the euro “will remain short-lived, but a hawkish result from the American Federal Reserve (Fed) this Wednesday could prove more difficult to dismiss”, declared Ipek Ozkardeskaya, analyst at Swissquote Bank, cited by Bloomberg.

A Fed meeting in sight

On Friday, the European currency had already been shaken after the publication of a strong monthly report on American employment for May. Or rather the dollar which had clearly strengthened against the single currency after the statistics. The euro ended Friday down sharply by 0.84% ​​to $1.08.

It must be said that the American economy created 272,000 jobs last month, much more than the 190,000 expected by economists surveyed by the Wall Street Journal. The unemployment rate stood at 4% compared to 3.9% anticipated by these same economists. The average hourly wage also increased by 0.4% over one month in May, compared to an expected increase of 0.3%.

“As average hourly wages increased by 0.4% over one month, the Fed will continue to focus on the upward risks of inflation rather than the risks of deterioration in the real economy,” Capital Economics indicated.

The euro therefore begins the week in a bad position before the meeting of the Fed’s monetary policy committee, which should, barring any surprises, maintain its rates in a context of stubborn inflation. Moreover, several inflation indicators in Europe and the United States will punctuate this week’s market agenda.