Paris, France – The euro experienced a sharp decline to its lowest level in a month following French President Emmanuel Macron’s decision to call for a legislative vote in response to a significant defeat in the recent European Parliament elections. The currency fell by 0.4%, echoing losses seen in European equities and French bonds, with banking giants BNP Paribas SA and Societe Generale SA enduring a more than 6% drop as leading stocks plummeted in Paris.
The unexpected gains made by the French far-right in the European elections pushed President Macron to take a risky gamble by announcing a snap election to combat the rise of Marine Le Pen, his political rival. Though German Chancellor Olaf Scholz also faced a blow, centrist parties throughout Europe managed to maintain their positions of influence. The potential threat posed by the European far-right movement climbing to higher seats of power presents a concerning risk for the currency, according to Simon Harvey, Monex Europe’s head of FX analysis.
Prior to these developments, the euro had already been under pressure following a notable decrease on Friday, driven by stronger-than-expected US jobs data that propped up the dollar. All eyes are now on Federal Reserve policymakers, who are scheduled to revise their rates forecast later in the week following disappointing data that has tempered hopes for substantial policy easing in the near future.
Meanwhile, the US dollar saw a surge against a range of currencies, leading to a slight downturn in US equity futures contracts. In related news, Southwest Airlines Co. experienced an increase of up to 5.5% in premarket trading after reports emerged that Elliott Investment Management had acquired a nearly $2 billion stake in the company. Additionally, the yield on 10-year Treasuries continued to rise for the third consecutive day.
Across the Asia-Pacific region, stock markets remained relatively stable, with particular attention directed towards India as Prime Minister Narendra Modi was set to announce his cabinet’s portfolios. Looking ahead, various economic events are scheduled to take place later in the week, including the UK jobless claims report, China’s CPI and PPI figures, and the US FOMC decision, which is likely to impact global markets.