FX will be dominated by two key themes over the coming months. The first is the prospect of Marine Le Pen’s RN party coming to government. The second are welcome signs of US disinflation, which will give the Federal Reserve (Fed) enough confidence to start cutting rates in September, Chris Turner, Global Head of Markets at ING noted.

EUR/CHF proves a cleaner vehicle to hedge against election risk

“Crosswinds in the FX market suggest EUR/USD should stay volatile within ranges – although probably with a downside bias this month as investors reduce euro exposure ahead of French elections on 30 June and 7 July. EUR/CHF is proving a cleaner vehicle to hedge against election risk and looks to press 0.9500.”

“On the subject of rate cuts, we see downside risks to sterling this month when UK May CPI likely comes in lower and the Bank of England signals it is ready to cut rates in August. This could send EUR/GBP back above 0.85 again.”

“And in the rest of the G10 space, our preference would be for outperformance of the commodities currencies whose central banks are last in the queue to cut rates – step forward the Australian dollar.”