Last week was heavily influenced by politics, with significant election outcomes in both the UK and Europe. Starting with the UK, the General Election resulted in a substantial Labour Party majority, which is being viewed positively for the Pound due to anticipated political stability. The Labour Party has secured a majority of 174 in the House of Commons, while the Liberal Democrats also won 71 seats, leaving center-right parties with less than 20% of the seats. Labour has promised a responsible fiscal approach, though increased spending pressures are expected.

In a surprising turn for both the center and far right, the previously ruling Conservative Party obtained only 122 seats, while Reform garnered just 5 seats despite significant voter support for the anti-immigration party.

Looking ahead, the primary driver for the Pound this week will likely be several UK data releases. On Wednesday, Bank of England (BoE) official Huw Pill is scheduled to speak. As the BoE had paused public statements ahead of the UK’s election, GBP investors will closely watch Pill’s remarks for any clues about UK monetary policy.

On Thursday, the latest UK GDP data is expected to show a slight increase, which could support the Pound towards the end of the week. Turning to the Euro, data from within the Eurozone is limited this week, potentially causing EUR exchange rates to lack a clear direction. Consequently, the French elections will dominate the news, with the Euro weighed down by the possibility of political deadlock in France, as exit polls indicate no party is likely to secure a clear majority.

The leftist alliance is projected to win up to 198 seats, Macron’s centrists up to 169 seats, and Marine Le Pen’s far-right National Rally up to 143 seats. These results have raised concerns about further political uncertainty and market volatility, with the prospect of a left-wing government posing potential fiscal risks.