Euro under pressure as Macron calls snap election

The euro is down for a third straight day and has dropped 1.3% since Thursday. EUR/USD is trading at 1.0731 in the European session, down 0.32% on the day. There are no releases out of the US or the eurozone today.

It was a busy weekend in Europe, as voters went to the ballot box for European Parliament elections. The far right parties made gains, including in Germany and France. This result was not a surprise but French President Macron delivered a bombshell after the vote results when he announced a snap election which will take place on June 30th and July 7th. Macron’s job is not at stake but he is taking a massive risk as the election could boost the far right as it did in the European Parliament vote. The uncertainty in France in the next few weeks could weigh on the euro.

On Wednesday, Germany releases the final estimate for May inflation. The preliminary estimate showed CPI rising by just 0.1% m/m after a 0.5% gain in April. Yearly, the preliminary estimate rose to 2.4%, up from 2.2% in April. Germany has projected an inflation rate of 2.4% for 2024 and the ECB will be keeping a careful eye on inflation in Germany and the eurozone after cutting rates last week for the first time since it started its rate-tightening cycle in July 2022.

Also on Wednesday, the US will release the May inflation report and the Fed announces its rate decision. Headline CPI is expected to remain unchanged at 3.4% y/y, while Core CPI is projected to drop from 3.6% to 3.5%. The Fed is virtually certain to hold the benchmark rate at 5.25% to 5.50% and the markets will be looking for clues as to future rate cuts.

EUR/USD technical

• EUR/USD is putting pressure on support at 1.0724. Below, there is support at 1.0647.

• 1.0840 and 1.0879 are the next resistance lines.