The pound sterling rose above 1.18 euros against the single currency following Emmanuel Macron’s shocking decision to call early elections in France.
The euro fell to a near two-year low against the pound yesterday as markets were stunned by Emmanuel Macron’s shock decision to call early elections in France.
Sterling rose above 1.18 euros against the single currency and hit its highest level since August 2022 after the French president’s move, which followed a strong performance by his party in the European parliamentary vote.
Stock markets across the continent were also shaken, with France’s Cac 40 falling to its lowest level since February.
Macron’s decision to call early parliamentary elections came after his Renaissance party was defeated by Marine Le Pen’s far-right National Rally party in the European elections.
Vote: The euro fell to a near two-year low against the pound yesterday as markets were stunned by Emmanuel Macron’s shock decision to call early elections in France.
The gamble could leave the president having to work alongside a National Rally prime minister in charge of the domestic agenda, including economic policy.
The Paris Cac 40 closed down 1.3 percent, with banks particularly hard hit.
BNP Paribas fell 4.8 percent, Credit Agricole lost 3.6 percent and Societe Generale fell 7.5 percent.
Elsewhere in Europe, the German Dax and the Italian FTSE MIB each fell 0.3 percent. In London, the FTSE 100 fell 0.2 percent.
Meanwhile, French 10-year bond yields – the yields investors demand to lend to the government – hit seven-month highs. Italian bond yields rose to six-month highs.
Le Pen’s agenda proposes greater public spending despite already high public debt, threatening higher financing costs for French lenders.
Analysts said a National Rally victory could also mean a tax on bank profits.
A coalition of moderates from across the continent appeared set to retain a majority in the European Parliament.
However, there were important gains for Eurosceptic parties, raising doubts about the ability of major powers to push through important policies.
In Germany, Europe’s largest economy, members of the fragile coalition led by social democrat Olaf Scholz suffered a blow and the great gains made by the far-right Alternative for Germany.
Scholz was also the subject of a harsh tirade from the head of the German Stock Exchange.
Deutsche Boerse chief Theodor Weimer said a “lack of leadership” from the chancellor was driving international investors away from Germany and that the country was “economically on the path to becoming a developing country”.
