EUR/GBP Rises Above 0.8450 As German Trade Surplus Exceeds Expectations

EUR/GBP traded higher in early European trading on Monday, trading around 0.8460. The move higher in EUR/GBP could be due to a higher-than-expected German trade surplus. The trade surplus rose to 24.9 billion euros in May, beating market expectations of 20.3 billion euros and the previous value of 22.2 billion euros (revised to 22.1 billion euros).

However, political uncertainty in France following the second round of parliamentary elections on Sunday has put some selling pressure on the euro (EUR), which could limit the upside in EUR/GBP. Exit polls suggest that the left-wing New Popular Front (NFP) led by Jean-Luc Mélenchon is expected to win the most seats, at least 174 seats, according to The Economist.

Meanwhile, CNBC reports that strategists at Deutsche Bank said: “This morning, trying to establish a government with any stability looks like a very high bar to set. They believe that markets will be wary of the “fiscal aggressive” spending and tax plans of the New Popular Front (NFP).

In the UK, the pound was supported by positive market sentiment due to the overwhelming victory of the Labour Party in the 2024 general election. The Labour Party won 410 seats, a significant increase of 212 seats from the 2019 general election.

In the absence of high-priority data in the UK, traders are likely to focus on the BRC’s year-on-year retail sales data on Tuesday and the GDP data on Thursday. These data points may provide new insights into the state of the UK economy.

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