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Pound hits highest level against euro in two years

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Sterling rose above €1.18 against the single currency following Emmanuel Macron’s shock decision to call a snap election in France.

The euro slumped to a near two-year low against the pound yesterday as markets were stunned by Emmanuel Macron’s shock decision to call a snap election in France.

Sterling rose above €1.18 against the single currency to hit its highest level since August 2022 after the French president’s move, which followed a bruising performance for his party in European parliamentary vote.

Stock markets across the continent were rocked too and France’s Cac 40 fell to its lowest level since February.

Macron’s decision to call a snap parliamentary election came after his Renaissance party was trounced by Marine Le Pen’s far-Right National Rally in the European vote. 

The gamble could leave the president having to work alongside a National Rally prime minister in charge of the domestic agenda, including economic policy.

Paris’s Cac 40 ended 1.3 per cent lower, with banks particularly badly hit. 

BNP Paribas fell 4.8 per cent, Credit Agricole lost 3.6 per cent and Societe Generale tumbled by 7.5 per cent .

Elsewhere in Europe, Germany’s Dax and Italy’s FTSE MIB each fell by 0.3 per cent. In London, the FTSE 100 slipped 0.2 per cent.

Meanwhile, yields on ten-year French bonds – the returns demanded by investors for lending to the government – hit seven-month highs. Italian bond yields rose to six-month highs.

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Le Pen’s agenda proposes higher public spending despite already-high public debt, threatening increased funding 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 looked set to retain a majority in the European parliament. 

However, there were major gains for Eurosceptic parties raising doubts about the ability of major powers to push through major policies.

In Germany, Europe’s biggest economy, members of the fragile coalition led by Social Democrat Olaf Scholz suffered a mauling with big gains made by the far-Right Alternative for Germany. 

Scholz was also subjected to a bruising diatribe by the head of Germany’s stock exchange.

Deutsche Boerse boss Theodor Weimer said a ‘lack of leadership’ by the chancellor was putting international investors off Germany and that the country was ‘economically on the way to becoming a developing country’.

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Read More: Pound hits highest level against euro in two years

2024-06-10 21:02:55

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