Euro rises despite French elections outcome as dollar retreats
The euro rose on Monday despite French President Emmanuel Macron losing an absolute majority in the country’s parliamentary election, as the dollar retreated against its major peers after hitting a 20-year peak last week.
Macron’s centrist Ensemble coalition secured the most seats in the National Assembly but fell well short of an absolute majority needed to control parliament, final results showed.
Analysts and traders shrugged off the election results, with the euro rising 0.2% against the dollar to $1.05155.
“Even though a Macron presidency and majority in Parliament would be very positive for euro zone cooperation and so forth, it’s more for the long term, it’s not something that affects markets here and now,” said Ingvild Borgen Gjerde, FX analyst at DNB Markets.
“There’s two things that are very important to the euro: What sort of anti-fragmentation tool the ECB can come up with, and the outlook for monetary policy.”
Last week, the European Central Bank promised to devise a new anti-fragmentation tool that should provide fresh support for the bloc’s indebted southern rim.
The dollar edged 0.2% lower to 134.715 yen, after hitting 135.44 yen in Asia-Pacific trading hours, close to Wednesday’s peak of 135.60, the highest since October 1998.
The dollar index, which measures the greenback against a basket of six currencies including the euro and yen, fell 0.25% to 104.44 but remained close to a two-decade high of 105.79 hit on Wednesday last week, the day the Federal Reserve raised interest rates by 75 basis points in an attempt to tame high inflation.
Fed Chair Jerome Powell will testify before the Senate and the House on Wednesday and Thursday this week.
The drift lower in the dollar is being driven mostly by thin trading with the U.S. markets observing a public holiday on Monday, said Osamu Takashima, head of G10 FX strategy at Citigroup Global Markets Japan.
The dollar lost 0.4% to 0.96525 Swiss francs, while sterling ticked up 0.1% to $1.2232.
The Australian dollar jumped 0.6% to $0.6980.
Leading cryptocurrency bitcoin remained weaker, however, falling 2% to $20,154, sliding back toward the weekend’s low of $17,592.78, a level not seen since late 2020.
(Reporting by AJFX Limited, Editing by Shivangi Jadav)