The US dollar rebounded from more than three-week lows on Friday after US payrolls data fueled bets that the Federal Reserve will soon start cutting interest rates.
French President Emmanuel Macron on Monday asked his prime minister to stay in his current role as he prepares for what will be difficult negotiations to form a new government after a surprise left-wing surge in elections that delivered a hung parliament.
“We’re still waiting to see if the coalition can get 240 to 250 legislators together, which is, I think France has a functioning government. We’re in a wait-and-see mode there.”, said Garth Appelt, head of foreign exchange and emerging market derivatives at Mizuho America in New York.
Some concerns about a potential French exit from the eurozone were also eased after Eurosceptic Marine Le Pen’s national rally failed to win a majority, said Helen Given, FX trader at Monex USA in Washington DC.
“There was a small risk that France would actually start moving towards exiting the eurozone” if the national rally had won, Given said. “People are happy to keep it off the table.”
The euro was last down 0.11% at $1.0824. It briefly touched $1.0845, its highest since June 12, after sinking to a low of $1.07915 earlier in the day.
The dollar index, which measures the US currency against the euro, sterling, yen and three other major rivals, rose 0.04% to 104.99. It had earlier fallen to 104.80, its lowest since June 13.
The greenback fell on Friday after the June employment report showed solid job gains in the month, but softer details under the hood.
Hiring in government and health care services accounted for nearly three-quarters of the wage gains, and the unemployment rate hit a 2-1/2-year high of 4.1%.
The economy also created 111,000 fewer jobs than previously estimated in April and May, while annual wages rose at their slowest pace in three years.
Traders will look to Fed Chairman Jerome Powell’s comments when he testifies before Congress on Tuesday and Wednesday for signs that a rate cut is approaching.
According to CME Group’s FedWatch tool, traders see the possibility of two cuts this year and are pricing in a 76% chance of this first rate cut at the Fed’s September meeting, with subsequent cuts expected by December.
The main US economic release this week will be consumer price data for June on Thursday.
The dollar rose slightly against the Japanese yen following data earlier on Monday that showed Japanese workers saw their average base pay rise 2.5% in May, the fastest pace in 31 years.
The Bank of Japan said a tight labor market is driving wage growth across the economy, signaling its confidence that the country is making progress towards sustainably achieving its 2% inflation target.
The optimistic assessment could add to the case for the central bank to hike interest rates ahead of its next meeting on July 30-31.
“You’re starting to see more and more talk about the BOJ taking a little more distance in terms of hiking policy. They’re thinking the BOJ is getting too close to the hiking window, whether it’s this month or the next meeting,” Appelt said.
The dollar was last up 0.02% at 160.76 yen, after hitting a 38-year high of 161.96 last week.
Sterling was steady after earlier hitting 3-1/2 week highs against the dollar and euro. The British currency rose after the Labor Party’s landslide victory in last week’s election that ended 14 years of Conservative rule. It was last up 0.02% at $1.281.
The Aussie dollar was down 0.18% at $0.6737 against the greenback, having previously touched $0.67615, its highest since Jan. 3.
Among cryptocurrencies, Bitcoin fell 0.08% to $56,312.
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