July 8 (Reuters) – The euro slipped on Monday, but came
off of overnight lows against the dollar after France’s election
pointed to a hung parliament.
The U.S. dollar crept up from a more than three-week low
after U.S. payrolls data on Friday boosted bets that the Federal
Reserve will soon start cutting interest rates.
French President Emmanuel Macron on Monday asked his prime
minister to stay in the role for now, pending 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 the 240
to 250 lawmakers together to have any semblance of a, what is
it, I think in France, a working government. We’re in
wait-and-see mode there,” said Garth Appelt, Head of Foreign
Exchange & Emerging Markets Derivatives, Mizuho Americas 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 to
move towards exiting the Eurozone” if the National Rally had
won, Given said. “People are just happy to have it off the
table.”
The euro was last down 0.11% at $1.0824. It
briefly reached $1.0845, the highest since June 12, after
dipping to a low of $1.07915 earlier in the day.
The dollar index, which measures the U.S. currency
against the euro, sterling, yen and three other major rivals,
gained 0.04% to 104.99. It earlier fell to 104.80, the lowest
since June 13.
The greenback fell on Friday after June’s employment report
showed solid jobs gains in the month, but softer details under
the hood.
Government and healthcare services hiring made up about
three-quarters of the payrolls gain and the unemployment rate
hit a 2-1/2-year high of 4.1%.
The economy also created 111,000 fewer jobs in April and May
than previously estimated, while annual wages increased at the
slowest pace in three years.
Traders will pay close attention to comments by Fed Chairman
Jerome Powell when he testifies before Congress on Tuesday and
Wednesday for signs that a rate cut is getting closer.
Traders see two cuts this year as likely and are pricing in
a 76% likelihood of this first rate cut at the Fed’s September
meeting, with a subsequent cut expected by December, according
to the CME Group’s FedWatch Tool.
This week’s main U.S. economic release will be consumer
price data for June on Thursday.
The dollar gained slightly against the Japanese yen,
following data earlier on Monday showing that Japanese workers
saw their average base pay climb 2.5% in May, the fastest pace
in 31 years.
The Bank of Japan said wage hikes were broadening across the
economy due to tight labor market conditions, signaling its
confidence the country was making progress toward durably
achieving its 2% inflation target.
The optimistic assessment may heighten the case for the
central bank to raise interest rates as soon as its next meeting
on July 30 to 31.
“You’re starting to see more and more discussions about the
BOJ lifting off a little bit in terms of hiking policy. They’re
thinking that the BOJ is getting much closer to the hiking
window, whether it be this month or the next meeting,” said
Appelt.
The dollar was last up 0.02% at 160.76 yen, after
last week reaching a 38-year high of 161.96.
Sterling was steady, after earlier reaching a 3-1/2 week top
versus the dollar and the euro. The British currency has gained
since the Labour Party’s landslide election victory last week,
which ended 14 years of Conservative rule. It was last
up 0.02% at $1.281.
The Aussie dollar fell 0.18% versus the greenback
at $0.6737, having earlier reached $0.67615, the highest since
Jan. 3.
In cryptocurrencies, bitcoin fell 0.08% to $56,312.
(Reporting By Karen Brettell; Additional reporting by Kevin
Buckland and Amanda Cooper; Editing by Arun Koyyur and Josie
Kao)
