The dollar held steady on Monday, while the euro traded around more than one-month lows, as political turmoil in Europe raised the level of uncertainty among traders, while investors awaited more data to gauge strength. of the American economy.
Investors have been eyeing the risk of a budget crisis in the heart of the euro zone, as far-right and left-wing parties gain momentum ahead of France’s snap parliamentary elections, putting pressure on President Emmanuel Macron’s centrist administration.
Even after French financial markets suffered a brutal sell-off late last week, European Central Bank policymakers have no plans to discuss emergency purchases of French bonds, five sources told Reuters.
The euro was flat at $1.0713, after falling to its lowest since May 1 at $1.06678 on Friday. Last week it also recorded its biggest weekly drop since April, standing at 0.88%.
“With traders wanting certainty, it may not arrive until after the second round vote (July 7), so the prospect of further declines in the French and EU markets is real,” said Chris Weston, head of research at Pepperstone.
The dollar index, which tracks the U.S. currency against a basket of six currencies, was unchanged at 105.54, around its highest level since May 2, driven mainly by weakness in the euro.
The European single currency “accounts for around 57% of the dollar index’s weighting, the fall of the euro has indirectly benefited the dollar,” said Matt Simpson, senior market analyst at City Index.
Minneapolis Federal Reserve President Neel Kashkari said Sunday it was a “reasonable prediction” that the U.S. central bank would cut interest rates once this year and wait until December to do so.
The Fed released updated projections last week showing that the median forecast among 19 U.S. central bankers was for a single interest rate cut this year.
LIGHT WEEK FOR DATA
This week is light on important US economic data to help clarify the Fed’s outlook, although Tuesday’s US retail sales and Friday’s flash PMIs may provide clues about consumption and economic strength.
“The data would likely have to miss estimates by a wide margin to reignite bets of more Fed cuts, with the FOMC meeting still fresh in investors’ minds,” City Index’s Simpson said.
The pound fell 0.1% to $1.2671. British inflation pressures still look too hot for the Bank of England to cut rates at its June 20 meeting, with most economists polled by Reuters predicting the first cut will not come until August 1.
Meanwhile, the yen remained stuck near a 34-year low against the dollar after the Bank of Japan on Friday deferred cuts to bond purchase amounts and details of its tapering plan to its policy meeting. July monetary.
Governor Kazuo Ueda said he would not rule out raising interest rates in July as the weak yen drives up import costs, although that may not be the hawkish statement some took it to be, said Hiroyuki Machida, director of sales of foreign exchange and raw materials from Japan in Australia & New Zealand Banking Group.
“The feeling was that raising rates and tapering are two separate things” that the Bank of Japan would decide to do or not to do based on different criteria, he said.
The yen weakened slightly to trade at 157.765, after falling to 158.26 following Friday’s decision, its lowest since April 29.
The yen’s fall to 160.245 per dollar in late April triggered several rounds of Japanese official intervention totaling 9.79 trillion yen. In cryptocurrencies, bitcoin fell 1% to $65,794, while ether fell 2% to $3,524, according to LSEG data.
