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Euro advances as Macron heads for huge majority

[LONDON] The European single currency advanced Monday after French voters put President Emmanuel Macron's party on course for a crushing parliamentary majority.

The British pound meanwhile headed back toward last week's lows that had been triggered by a shock British election result that has thrown the country into uncertainty.

The euro jumped above US$1.12 in the aftermath of Sunday's first round of voting for the France's National Assembly.

The pound held only barely above Friday's seven-week low of US$1.2636.

In France, projections showed Mr Macron's Republique en Marche (Republic on the Move, REM) party and its ally MoDem tipped to win 400 to 445 seats in the 577-member National Assembly in next Sunday's second round.

"The rejection of populism has been one the main reasons why the euro" has been one of the best-performing G10 currencies this year, said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ in London.

"There were further positive political developments in Europe over the weekend as the French public provided another vote of confidence in President Mr Macron's policy agenda for economic reform." Official results showed Mr Macron's one-year-old REM and allies MoDem winning 32.32 per cent, ahead of the Republicans with 21.56 per cent and the FN with 13.20 per cent.

Such a share would give Mr Macron - who founded his party just a year ago - one of the biggest parliamentary majorities seen in the modern French state.

But the strong euro - combined with a pre-weekend technology sell-off on Wall Street - weighed heavily on eurozone stock markets, with Frankfurt and Paris each shedding around one per cent.

"It appears that the euro's solid gains against both the dollar and the pound following Mr Macron's parliamentary success in France has sucked the life out of the eurozone indices," said Spreadex analyst Connor Campbell.

Sterling took a beating on Friday after Prime Minister Theresa May's ruling Conservative Party lost its parliamentary majority, days before it starts crunch Brexit talks with the EU on exiting the bloc.

Ms May called the election three years early in a bid to strengthen her hand in looming Brexit negotiations, but the strategy backfired spectacularly and now she must rely on the support of Northern Ireland's Democratic Unionist Party.