Dollar firm, euro near one-month low

by Jonathan Adams
Dollar rises

The dollar index was unchanged at 105.54, while the euro dropped 0.04% to $1.07025

The dollar was firm on Monday as the euro stayed near a more than one-month low amid political turmoil in Europe, while investors awaited fresh clues on the strength of the U.S. economy.

Investors have been contemplating the risk of a budget crisis at the heart of the euro area, as far right and leftist parties gain momentum ahead of France’s parliamentary election, pressuring President Emmanuel Macron’s centrist administration.

Even after the French financial markets endured a strong sell-off late last week, ECB policymakers have no plans to discuss emergency purchases of French bonds, five sources told Reuters.

The euro dropped 0.04% to $1.07025, after declining to its lowest since May 1 at $1.06678 on Friday. The currency also logged its biggest weekly drop since April at 0.88% last week.

Although the political turmoil is a euro-bearish story, “as the euro accounts for around 57% of the US dollar index weighting, the fall of the euro has indirectly benefited the dollar,” according to Matt Simpson, senior market analyst at City Index.

The dollar index was unchanged at 105.54, after hitting its highest since May 2 at 105.80 on Friday.

Minneapolis Federal Reserve President Neel Kashkari said on Sunday it was a “reasonable prediction” that the U.S. central bank would reduce interest rates once this year, waiting until December to do it.

The Federal Reserve published updated projections last week that showed the median forecast from all 19 U.S. central bankers was for a single interest rate cut this year.

This week is light on major U.S. economic data to help clarify the Fed’s outlook, although U.S. retail sales on Tuesday and flash PMIs on Friday may give hints about consumption and economic strength.

Data would likely have to miss estimates by a wide margin to rekindle bets of more Fed cuts, with the Federal Open Market Committee (FOMC) meeting still freshly in the minds of investors, according to Simpson.

Sterling held steady at $1.2681. Britain’s inflation pressures still seem too hot for the BoE to trim rates at its June 20 meeting, with a majority of economists polled by Reuters forecasting the first cut would not come until August 1.

Elsewhere, the yuan was flat at 7.2557 per dollar after domestic data showed a mixed economic picture in China.

The offshore Chinese yuan held near 7.2694.

The yen steadied at 157.45, after sliding to 158.26, its lowest since April 29.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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