EUR/USD holds steady below 1.0750 amid stronger US Dollar, political uncertainty in France

The EUR/USD pair trades on a flat note around 1.0735 on Friday during the early Asian trading hours. The upside of the pair might be limited amid the uncertainty surrounding European parliamentary elections. Investors will take more cues from the ECB’s Christine Lagarde speech and the preliminary US Michigan Consumer Sentiment report for June. 

The European Parliament election revealed fault lines in several member states. In France, after a defeat by the far-right National Rally, President Emmanuel Macron has dissolved parliament and has called a snap election, risking a far-right rise in the country's parliament, according to the European Council on foreign relations website. 

The combination of political uncertainty in Europe and rate cuts from the European Central Bank (ECB) might exert some selling pressure on the Euro (EUR) against the Greenback for the time being. The ECB cut interest rates by 25 basis points (bps) during its June meeting last week, a move widely expected by market participants. It takes the ECB’s key rate to 3.75% from a record 4% since September 2023. Financial markets have fully priced one further reduction this year, but economists polled by Reuters last week forecast two more cuts taking place towards the end of 2024. 

Across the pond, the US Producer Price Index (PPI) came in weaker than expected, increasing 2.2% YoY in May, compared to the 2.3% rise in April (revised from 2.2%), the US Bureau of Labor Statistics reported on Thursday. Meanwhile, the core PPI figure rose 2.3% YoY in May, below the consensus and April’s reading of 2.4%. The US Initial Jobless Claims for the week ending June 6 increased by 242K from the previous week's reading of 229K, above the market consensus of 225K. 

Nonetheless, the weaker US economic data failed to drag the Greenback lower against its rivals as the Federal Reserve (Fed) signaled that it will cut its key interest rate just once by 25 basis points (bps) toward the end of 2024. Fed Chair Jerome Powell said that only "modest" progress had been achieved towards meeting the target and that the US central bank would need "good inflation readings" before cutting interest rates, per BBC.