North American FX Open - Politics still taking center stage

Politics continues to dominate proceedings after the weekend's second round of voting in the French elections brought a major surprise, with the National Rally party of Le Pen coming in third place behind President Macron's centrist alliance. The hastily assembled left wing alliance won the most seats, but are unlikely to be able to govern and a hung parliament is now the outcome, as none of the three blocs can form an outright majority.

The left wing alliance's leader Jean-Luc Melenchon vowed to implement the leftist New Popular Front's entire spending program and said he would refuse to enter into a deal with Macron.

German Chancellor expressed his relief at the French election outcome and stated that he has a strong interest in a well functioning EU, which is only possible with France.

Eur/Usd initially gapped lower in Asian trade, but a bid swiftly returned taking the pair up to 1.0843, which matched last Fri's peak, as the Dollar remains on the back foot after last week's round of disappointing data.

The ECB's Knot stated that he is fine with the markets rate cut expectations and that disinflation is well entrenched. Knot added that the ECB's September meeting is the next one that will be "truly" open.

Germany's latest trade data showed a disappointing 3.6% fall in exports in May after the upwardly revised 1.7% reading in April.

Meanwhile the EZ Sentix Investor Confidence reading came in lower than forecast at minus 7.3 for July after the 0.3 reading in June.

In the US, Bbg reported that several influential congressional Democrats said privately yesterday they want Biden to step aside as the party's White House nominee, as the US president enters a pivotal week for his teetering reelection campaign.

In Japan, workers base salaries jumped the most since 1993 at 2.5% y/y in May, an encouraging sign that the underlying pay trend may start to support consumption and enable the BOJ to raise interest rates again. And, Tokyo Governor Koike secured a victory to lead the Japanese capital for a third term, providing some relief for struggling PM Kishida and his ruling party that supported her.

It is a quiet day data wise ahead, with just the NY Fed's ! year inflation expectations and consumer credit due.

With the UK election now out of the way, we will see the return of commentary from the Bank of England's MPC members. After the six week hiatus, we suspect that the likes of Haskel today, as well as Pill and Mann on Wednesday might have turned a little bit more dovish.

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