Home Business News Investors warn of a hung parliament in France, which could limit the Euro’s potential

Investors warn of a hung parliament in France, which could limit the Euro’s potential

8th Jul 24 12:24 pm

The euro has broadly remained in an uptrend since the beginning of the month.

However, the European currency was relatively calm following France’s election results, which indicated a possibility of a hung parliament due to the strong performance of the left-wing New Popular Front (NFP) alliance and the absence of a clear majority.

This unexpected outcome has heightened uncertainty over France’s fiscal outlook, with market participants concerned about implications for fiscal deficits and eurozone stability.

The rise of left-wing parties and increasing political uncertainties in France could create a bearish sentiment for the euro, limiting the currency’s medium-term upside.

French bond yields pulled back last week but stabilized somewhat in early European trading, though they remain under pressure. Price action in French fixed-income markets reflects investor uncertainty, with market participants seeking a clearer direction. Looking ahead, yields on French bonds could rebound in the near term as uncertainty around the direction of a new government could continue to fuel investors’ concerns.

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