EUR/GBP Holds Gains Above 0.8450 Ahead Of Eurozone Inflation Data

EUR/GBP rose for the fifth consecutive day around 0.8490 during early European trading on Tuesday. The euro (EUR) rose after the first round of French elections showed that the far right will defeat President Emmanuel Macron but fail to win an absolute majority in parliament. Investors will be closely watching the preliminary reading of the Eurozone Harmonized Index of Consumer Prices (HICP) for June, which will be released on Tuesday.

Marine Le Pen’s far-right National Rally (RN) party won 33.15% of the votes in the first round of French parliamentary elections held on Sunday, according to final results released by the French Interior Ministry on Monday. Meanwhile, the centrist coalition led by French President Emmanuel Macron suffered heavy losses and came in third with 20.76% of the votes. The left-wing coalition New Popular Front (NFP) emerged strongly with 27.99% of the votes.

However, the New Popular Front may fall short of the 289 seats required for an absolute majority, which will increase the exchange rate of the common currency against the British pound (GBP). “The euro could face more short-term headwinds if Marine Le Pen’s National Rally (RN) wins an outright majority,” commented Alejandro Cuadrado, chief strategist at BBVA.

On the other hand, the British pound weakened as investors remained uncertain about the timeline for the Bank of England (BOE) to start cutting interest rates. In addition, market participants also turned cautious ahead of Thursday’s UK general election results. According to the latest exit polls, the opposition Labour Party is expected to win from the Conservative Party led by British Prime Minister Sunak.

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