Emmanuel Macron calls snap election in France.

  • US Nonfarm payrolls rose 272k Friday well above the expected 165k the previous month.
  • US unemployment rate moved up slightly from 3.9% to 4%.
  • French President Emmanuel Macron calls snap general election.
  • Voting is expected to take place between June 30th to July 7th.
  • UK manufacturing sector hit a 2-month high last month.
  • UK election continues.

US Dollar

On Friday, the US Nonfarm payrolls rose 272,000 in May from a 165,000 increase in April, above the market consensus of 185,000. Meanwhile, the Unemployment Rate ticked up to 4.0% in May from 3.9% in April. The Average Hourly Earnings climbed 4.1% YoY in May from 4.0% in April (revised from 3.9%), better than the estimate of 3.9%, according to the US Bureau of Labor Statistics.  The robust US employment report pared back rate cut expectations from the Federal Reserve (Fed) on Thursday. Futures traders see almost no chance of a rate cut before September, according to data from CME Group. The higher-for-longer US rate mantra is likely to support the USD for the time being.

Euro

French resident Emmanuel Macron called for a snap election after voters effectively handed more power to far-right parties, which could hamstring his ability to push through legislation over the next five years. Millions voted on Sunday for the EU parliamentary elections, which saw the far right make major gains and rattle the traditional powers. Macron addressed the nation on Sunday and said “I’ve decided to give you back the choice of our parliamentary future through the vote. I am therefore dissolving the National Assembly.” The votes are expected to take place om June 30 and July 7. Following this the EUR weakened slightly bringing us into the 1.18 level.

British Pound

GBP initially firmed this week, with the currency being supported by confirmation that growth in the UK’s manufacturing sector struck a two-year high last month. An optimistic market mood then helped the increasingly risk-sensitive Sterling to maintain a positive trajectory through the first half of the week. GBP exchange rates then began to falter in the second half of the session following a survey from the Bank of England, which pointed to a likely fall in inflation over the coming year as UK businesses expected to deliver lower wage increases over the next 12 months.

Looking ahead, the UK’s latest jobs report is likely to act as a key catalyst of movement for the Pound Euro exchange rate this week. This could lead to a pullback in Sterling if further signs of a cooling labour market and slowing wage growth stoke BoE rate cut bets. On the other hand, the Pound may firm if April’s figures outpace expectations. Also potentially influencing GBP exchange rates will be UK election jitters, on the assumption that the main political parties will soon release their manifestos.

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