EUR/USD started July on a firm note. Markets are less nervous due to doubts about the far-right National Rally Party gaining an absolute majority, DBS Senior FX Strategist Philip Wee notes.

ECB's wait-and-see stance supports the Euro

“EUR/USD started July on a firm note, appreciating 0.9% to 1.0812 in the first four days.” 

“Markets became less nervous due to doubts about the far-right National Rally Party gaining an absolute majority at this Sunday’s second round of the French elections. The risk premium denoted by the 10Y bond yield differential between French and German bonds peaked at 82 bps on June 27 and narrowed to 67 bps yesterday, its narrowest since June 12.”

“Euro was also supported by the European Central Bank’s wait-and-see stance after its first rate cut on June 6.”