Home Economy News Morning Bid: With France in limbo, spotlight swings to Washington

Morning Bid: With France in limbo, spotlight swings to Washington

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A look at the day ahead in European and global markets from Kevin Buckland

Washington largely steals the spotlight from today, even with post-French-poll horsetrading at fever pitch.

Fed Chair Jay Powell kicks off two days of a semi-annual Congressional testimony with an appearance before the Senate later on Tuesday.

Inflation was a worry at the start of the year, but it’s been cooling lately, while the jobs market is showing signs that months of tight policy is taking its toll.

Traders will be watching for how Powell walks that tightrope between risks of reigniting price pressures while not creating unnecessary hardship for the voting American worker.

The day after Powell’s testimony concludes, Thursday brings the latest reading on consumer prices – which is probably the opposite order of events to what investors, and maybe Powell too, might have preferred.

Question marks also hang over the U.S. presidential election in November.

Incumbent Joe Biden keeps insisting he’s staying in the race, even as his rivals and the media keep looking for reasons he should be retiring.

Biden at least seems to be winning over the bookmakers: odds of him running rose 13 cents to be 54 cents on the dollar, while odds on Kamala Harris replacing him fell by the same amount to 30 cents, from pretty much neck-and-neck at the weekend.

Donald Trump may remove an unknown from his bid to retake the White House on July 15, the start of the Republican convention, when he could name his running mate.

In France, with the vote essentially split across the three parties that span the political spectrum, it’s hard to imagine what an eventual government might look like.

Even the winners of the vote, the leftist New Popular Front (NFP), was a hastily cobbled together alliance aimed at thwarting the rise of the far-right National Rally (RN).

That it did, taking a leading 182 seats in parliament to the RN’s 143, while President Emmanuel Macron’s centrist Ensemble Alliance took 163 seats.

What seems certain is a period of political paralysis and a decline in France’s clout in Europe. But it also avoids the outcome markets had feared most, of fiscal profligacy by the far right.

The euro swung between extremes on Monday, but with the dust now settling, the shared currency is sitting close to a four-week high.

No major macro events are scheduled for Europe on Tuesday, with the most notable releases being June CPI readings from Greece, Hungary and the Netherlands.

Key developments that could influence markets on Tuesday:

-Greece, Hungary, Netherlands CPI (June)

-Fed Chair Powell testimony to Senate

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