Dollar Strengthens Amid Euro Uncertainty
The dollar maintained its strength on Monday, with the euro hovering near one-month lows amidst escalating political uncertainty in Europe. Investors awaited further economic data to gauge the U.S. economy’s resilience amidst global market tensions.
Euro Under Pressure
Political turmoil ahead of France’s snap parliamentary election has raised concerns about potential fiscal challenges within the eurozone. The euro edged down 0.1% to $1.0699, having touched its lowest point since May 1 at $1.06678 on Friday. Last week, the currency recorded its most significant weekly decline since April, dropping by 0.88%.
Chris Weston, head of research at Pepperstone, commented, „With traders seeking clarity, stability may only come after the second-round vote (July 7), heightening the possibility of further declines in French and EU markets.“
Dollar Index Gains
The dollar index, which measures the greenback against a basket of major currencies, remained near its highest levels since May 2. This upward trend was primarily driven by weakness in the euro, which constitutes approximately 57% of the index.
Matt Simpson, senior market analyst at City Index, noted, „The decline in the euro has indirectly benefited the dollar.“
Fed’s Rate Cut Expectations
Minneapolis Federal Reserve President Neel Kashkari indicated that a rate cut by the U.S. central bank once this year is a „reasonable prediction,“ with December being a likely timing. Recent Fed projections suggested that a majority of policymakers anticipate only one rate cut in 2019.
Light Week for U.S. Data
This week’s U.S. economic calendar is relatively light, offering minimal guidance on the Fed’s future outlook. However, Tuesday’s retail sales data and Friday’s flash PMIs are expected to provide insights into consumer spending and economic activity.
Matt Simpson from City Index remarked, „Significantly missing data estimates could reignite expectations of additional Fed cuts, considering the recent FOMC meeting.“
Other Currency Movements
Sterling dipped slightly by 0.1% to $1.267, as concerns about inflationary pressures in the UK continue to weigh on the prospect of rate cuts by the Bank of England.
Meanwhile, the yen stabilized near a 34-year low against the dollar following the Bank of Japan’s recent adjustments to bond buying and tapering plans announced last Friday.
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