The EUR/GBP pair is struggling to extend its recovery above 0.8450 due to political uncertainty in France. The Left Wing, led by Jean-Luc Melenchon, unexpectedly gained an upper hand in the recent elections, causing concerns about the formation of a coalition government. However, fears of a widening French debt crisis have eased as the Far Right failed to secure an absolute majority.
On the monetary policy front, the European Central Bank (ECB) is expected to keep interest rates steady in July, but there is a possibility of rate cuts in the September meeting. ECB policymaker Klaas Knot expressed openness to more rate cuts this year.
In the UK, the Pound Sterling remains strong as Keir Starmer’s Labour Party secured a decisive victory in the parliamentary elections, bringing political stability to the economy. Uncertainty looms over the Bank of England’s decision to reduce interest rates, with policymakers like Jonathan Haskel supporting keeping rates unchanged for now.
Overall, the Pound Sterling’s firmness against the Euro reflects the positive impact of political stability on the UK economy’s financial markets.