Could the French election yet trigger a crisis for the euro? The market reaction to Marine Le Pen’s National Rally winning the popular vote in round one was maybe more muted than feared – a hung parliament seemed to be the assumption. But there is still ample scope for volatility in the Euro and CAC 40 index come Monday morning when the second round of voting in the French election is complete and the makeup of the 577-deputy National Assembly becomes known.

There has been some volatility in the euro and CAC 40 index since the first round, which was won by the right-wing Rassemblement National (RN), but it’s unclear what the market will make of the result. The French election risks may be underpriced. Even the more moderate aspects of the RN agenda involve conflict with Brussels on fundamental pillars of the EU – domestic subsidies (the Single Market), a rebate for France (the EU Budget), and deficits (Stability & Growth Pact).

Fed chair Jay Powell is due to testify on monetary policy in front of the Senate Banking Committee. Last week in Sintra he indicated the Fed is not in a rush to cut rates: “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of … loosening policy.”

The Reserve Bank of New Zealand (RBNZ) will likely leave its official cash rate (OCR) on hold at 5.5%, and likely emphasise the upside risks to inflation.

Come Thursday all eyes will be on the latest round of CPI inflation from the US. CPI was flat month-on-month in May, up 3.3% for the year. Core CPI increased 0.2% on the month and 3.4% from a year ago, which was a slower pace than expected.

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