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Euro falls to $1.0764, lowest in a month after Macron's

election

call

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Eurosceptic nationalists gain in EU, Macron risks losing

domestic control

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Financial markets face uncertainty with upcoming elections

in

France, UK, US

By Dhara Ranasinghe

LONDON, June 9 (Reuters) - The euro fell in early Asia

trade on Monday, a sign of the unease likely to beset Europe as

French President Emmanuel Macron called a shock legislative

election after being trounced in the European Union vote by the

far-right.

The euro slipped 0.3% to , touching its lowest

level in around a month, according to LSEG data. The euro also

edged lower versus the British pound, dropping 0.35% to 84.60

pence. It touched its lowest levels since August 2022, having

fallen to that area in late May.

Eurosceptic nationalists made the biggest gains in European

Parliament elections in the Sunday vote while the Greens and

liberals lost ground, an aggregated exit poll showed.

In Italy, Prime Minister Giorgia Meloni's arch-conservative

Brothers of Italy group won the most votes, exit polls showed,

confirming its status as the nation's most popular party.

Macron's surprise decision represents a major roll of the

dice on his political future, three years before his presidency

ends. If Marine Le Pen's far-right National Rally (RN) party

wins a parliamentary majority, Macron would be left without a

say in domestic affairs.

"That is probably somewhat bad news for markets," said

Berenberg chief economist Holger Schmieding.

"It introduces an unexpected element of uncertainty."

Renewed political uncertainty in the euro zone's

second-biggest economy jolts financial markets in a key election

year and at a time of heightened geopolitical risks.

Britain holds a general election on July 4 and crucial U.S.

elections take place in November.

WAKE-UP CALL?

While the euro and euro area assets more broadly have been

largely cushioned by diminished euro-scepticism compared with

elections in the 2010s and early 2020s, the surprise news from

France and wins for eurosceptic parties in the EU election could

be a wake-up call.

In focus when broader European markets open later on Monday

will likely be Italy's 10-year government bond yield gap over

benchmark Germany - often a good barometer of risk appetite in

the region.

The spread was at around 133 basis points late on Friday,

comfortably below peaks seen last year above 200 bps.

Europe's broad STOXX 600 share index, which has

been trading near record highs, could also be vulnerable.

"Obviously, the snap election is a new source of

uncertainty, which should have some negative impact on economic

and market confidence, at least in France," said Jan von Gerich,

chief market analyst at Nordea.

But he noted that EU election results do not always

translate directly into a domestic parliamentary election

result, due to a different election system and typically more

protest voting in European elections.

Peter Cardillo, chief market economist at Spartan Capital

Securities in New York, said it would take a huge surge to the

far right for the euro to weaken substantially.

The euro is down roughly 2.5% against the dollar so far this

year, and its path has largely been driven by the relative

outlooks for interest rate cuts in the euro area and United

States.

The European Central Bank last week delivered its first rate

cut in five years.

In France, where concern about the country's high debt

levels have grown this year, the implications of renewed

political uncertainty for the economy could also be in focus.

Standard & Poor's last month cut its rating on France's

sovereign debt, delivering a painful rebuke of the government's

handling of the strained budget days before the EU election.