Morning Bid: Euro strength and horse-trading in France

A look at the day ahead in European and global markets from Ankur Banerjee

European markets are poised for a strong start to the second half of the year after the first round of voting in France put the far-right National Rally (RN) party ahead, but with a smaller share than some polls had projected, lifting the euro to a two-week high.

Exit polls, which were in line with the opinion surveys, showed Marine Le Pen's RN party emerging ahead in the first round, winning around 34% of the vote, comfortably ahead of leftist and centrist rivals.

The chances of eurosceptic, anti-immigrant RN winning power next week though remain uncertain, and will depend on the political dealmaking by its rivals over the coming days, with horse-trading already under way.

The better-than-feared results lifted the euro, with the single currency touching a two-week peak of $1.076175, while stocks futures climbed 1% and French OAT (bond) futures gained 0.12%.

The broader French market will likely get a boost, especially as the blue-chip CAC 40 index has dropped 6% since French President Emmanuel Macron dissolved parliament.

Analysts though point out that the week may still be volatile as the RN could gain a majority in next Sunday's runoff.

Traders and markets are concerned that the far-right, as well as the left-wing alliance that came second on Sunday, have pledged big spending increases at a time when France's high budget deficit has prompted the EU to recommend disciplinary steps.

Beyond France, the UK is also gearing up for the general elections on Thursday, with the opposition Labour Party expected to win in a landslide victory.

While sterling has bounced around in June, dropping nearly 1% in the month, the currency's future depends on the next government convincing skittish investors that its plans to fix a stagnant economy are credible.

Key developments that could influence markets on Monday:

Economic events: Germany's June inflation, PMI data for June from euro zone and Germany

(By Ankur Banerjee; Editing by Sherry Jacob-Phillips)