LONDON (Reuters) – The pound hit its highest level in almost two years against the euro on Monday, although it fell against the dollar as the single currency fell after French President Emmanuel Macron called early elections after being defeated far to the right in the EU vote.
The euro fell to 84.53 pence, its weakest since August 2022, breaking out of its recent range against the pound and also falling against the dollar along with declines in other French and eurozone assets.
It was last down 0.37% at 84.59p.
Center, liberal and socialist parties were expected to retain majorities after European Parliament elections, but Eurosceptic nationalists made the biggest gains, raising questions about the ability of the major powers to carry out policy in the bloc.
Taking a risky step to restore power, Macron called parliamentary elections, the first round of which is scheduled for June 30.
“Expect a lot about the different political scenes: the upcoming UK general election is expected to give the UK a very large Labor majority, while the French election promises to create a parliament diametrically opposed to the presidency,” Chris Turner said. , in a note from ING’s global head of markets.
“We probably can’t rule out a bit of a downside this week – perhaps to 0.8400… But we think this sterling rally won’t last long and is likely to reverse next week when we get news from the Bank of England next Thursday – likely preparing the market for an August rate cut,” Turner added.
UK wages data for April, due on Tuesday, will be the key data this week ahead of the Bank of England meeting. Markets viewed a policy change at this meeting as highly unlikely given persistent service sector inflation in April.
In addition, industry research published on Monday showed the UK hiring market is poised for recovery.
But the pound fell 0.2% against the dollar on Monday to $1.2698, extending its decline from a 0.5% fall on Friday, as hotter-than-expected US jobs data sent markets off bets. the Federal Reserve’s first interest rate cut at the end of 2024.
(Reporting by Alan John; Editing by Mark Potter)