Euro Dips Amid French Election Uncertainty, Dollar Weakens on Soft U.S. Payrolls Data
The euro falls as France’s election results indicate a hung parliament. The dollar remains weak following soft U.S. payrolls data, while the yen and sterling make gains.
Bollywood Fever: The euro slipped on Monday after projections from France’s election pointed to a hung parliament amid an unexpectedly strong showing for a left-wing alliance, creating fresh uncertainty over the country’s fiscal outlook.
Meanwhile, the dollar remained on the back foot following surprisingly soft U.S. payrolls data on Friday, which boosted bets for the Federal Reserve to start cutting interest rates as early as September. The yen headed for a third day of gains after rebounding from last week’s nearly 38-year trough against the dollar.
Sterling rose to a 3-1/2-week high versus its U.S. counterpart as the British currency continued to firm following the Labour Party’s landslide election victory last week, which ended 14 years of Conservative rule.
The euro was 0.06% lower at $1.0827, having earlier slid as much as 0.4% as investors weighed the consequences of a hung French parliament. The projected results included a likely first-place finish for the leftist New Popular Front (NFP) alliance and a last-place showing for Marine Le Pen’s nationalist, eurosceptic National Rally (RN), which had been the frontrunner going into Sunday’s vote.
Polling agencies forecast the left would secure 184 to 198 seats, well short of the 289 seats needed for an absolute majority. President Emmanuel Macron’s centrist alliance was expected to get 160 to 169 seats, with the RN and its allies projected to obtain 135 to 143 seats.
“Markets won’t like a far-left government having a say,” said Chris Weston, head of research at Pepperstone. “At the same time, the fact that centrist Macron has polled better-than-expected, as well as the number of seats the Left have obtained, means passing the NFP’s manifesto in full will be a real challenge. And while uncertainty is high once again, this should contain the fallout.”
The dollar index, which measures the U.S. currency against the euro, sterling, yen, and three other major rivals, was flat at 104.97, licking its wounds after a 0.9% slump last week, exacerbated by Friday’s softer U.S. jobs market reading. Traders currently set about 76% odds for a rate cut at the Fed’s September meeting, up from 64% a week ago, according to the CME Group’s FedWatch Tool.
The dollar slipped 0.07% to 160.70 yen, down from as high as 161.96 on Wednesday. Sterling edged back 0.08% to $1.2804, after earlier rising to $1.2820 for the first time since June 12.
In cryptocurrencies, bitcoin fell about 2% to $55,188, continuing the weak run from last week as traders fretted over the likely dumping of tokens from defunct Japanese exchange Mt. Gox.
As global markets react to political and economic developments, the coming days will be crucial for currency traders watching for further signals from central banks and government elections.
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