EUR/GBP moves above 0.8450 amid higher-than-expected German Trade Balance

• EUR/GBP gains ground as German Trade Balance increases to €24.9 billion in May.
• The Euro may struggle due to political uncertainty in France.
• The Pound Sterling could limit its downside due to positive sentiment following the Labour Party's landslide victory.

EUR/GBP edges higher to near 0.8460 during the early European session on Monday. This upside could be attributed to the higher-than-expected German Trade Balance. The trade surplus increased to €24.9 billion in May, surpassing the market expectations of €20.3 billion and the previous reading of €22.2 billion (revised from €22.1 billion).

However, political uncertainty in France following the second round of parliamentary elections on Sunday exerted some selling pressure on the Euro (EUR), which might limit the upside of the EUR/GBP cross. According to The Economist, exit polls indicated that the left-wing New Popular Front (NFP), led by Jean-Luc Mélenchon, is on track to win the most seats, having secured at least 174 seats.

Meanwhile, CNBC reported that Deutsche Bank strategists saying “Trying to build a government that has any kind of stability looks a very high bar this morning. Political paralysis for the next 12 months seems the most likely outcome.” They believe markets will be wary of the NFP's “fiscally aggressive” spending and taxation plans.

In the United Kingdom (UK), the Pound Sterling (GBP) receives support due to positive sentiment following the Labour Party's landslide victory in the 2024 general election. Labour won 410 seats, a significant increase of 212 seats from the 2019 elections.

In the absence of high-priority data from the UK, traders are likely to focus on the releases of BRC Like-For-Like Retail Sales on Tuesday and Gross Domestic Product figures on Thursday. These data points could provide fresh insights into British economic conditions.