• EUR/GBP loses ground on the risks to the EU of a far-right victory in Sunday’s French elections. 
• Weak German IFO data further weighs whilst the Pound gains some support from firm Retail Sales data. 
• Pound Sterling manages to exorcize some of the dovishness from the BoE’s June meeting. 

EUR/GBP is trading lower in the 0.8440s on Tuesday as the Euro (EUR) loses ground due to rising political risk premia amid concerns about the outcome of the French-election, whilst the Pound Sterling (GBP) finds support after recent UK Retail Sales data beat forecasts, easing expectations that the Bank of England (BoE) go ahead with interest-rate cuts in August, as is widely expected.

EUR/GBP falls as French Election threatens European project

The Euro is depreciating ahead of the French elections on Sunday June 30 when the French will vote in their next parliament. At the moment the far-right National Rally (RN) is in front with 34% of the vote and is projected to win 260 seats in the National Assembly, just short of the 289 needed for a clear majority to rule, according to Politico. 

If National Rally wins the election it will be a massive setback for the European Union (EU), shake the foundations of the world order, and drive a wedge into the western alliance at the heart of NATO. 

“An RN government would therefore be a dagger to the belly of Western as well as European unity. It would threaten Russian infiltration of the French — and therefore Western — intelligence services,” says John Lichfield, a contributor to Politico. 

That said, at the moment the RN does not look like it will quite get a clear majority, resulting in what Lichfield calls an “utterly blocked parliament.