The Euro experienced a decline, reaching a one-month low, as French President Emmanuel Macron announced a snap legislative election, stirring political uncertainties.
Concurrently, the dollar gained strength, buoyed by an unexpectedly strong U.S. jobs report last Friday, which tempered expectations for imminent rate cuts.
Picture: The downside prevails for EUR/USD pairs. Download the VT Markets app now.
In the Asian trading hours, the Euro fell to $1.07485, reacting to Macron’s move aimed at consolidating his authority following the far-right’s gains in the European Union vote. The political shift in Europe coupled with robust U.S. employment data exerted dual pressure on the Euro, pushing it downwards.
The Euro was trading down by 0.44% at $1.0753, marking a 2.5% decline against the dollar this year. It also recorded a significant drop against the British pound and a slight decrease against the Japanese yen.
The compounded impact of the U.S. labour market’s strength and European political instability on the Euro comes after the European Central Bank initiated a rate cut last week. This move was expected, but offered little guidance on future monetary policies amidst persistently high inflation.
While key markets in Asia and Australia were closed for holidays, the U.S. dollar index rose by 0.18% to 105.25, touching a near one-month peak.
The nonfarm payroll data, which showed a 272,000 job increase versus an anticipated 185,000, adjusted market expectations for Federal Reserve rate cuts this year to around 36 basis points, down from nearly 50 basis points previously estimated.
As the Federal Reserve prepares for its upcoming meeting, all eyes will be on any revisions to economic forecasts, especially with U.S. inflation data pending release the same week.
In Asia, the Bank of Japan is set to conduct its monetary policy meeting, with expectations to maintain interest rates between 0-0.1%. Recent discussions within the BOJ suggest potential adjustments in its bond-buying strategy, which could provide further guidance on its monetary stance.
Also read: Bank of Japan (BOJ) open to act on excessive Japanese yen decline
Meanwhile, the Japanese yen weakened further against the dollar, and sterling remained mostly stable, with slight fluctuations in early trading.
The currency market remains attuned to these developments, anticipating more definitive directions from upcoming economic reports and central bank meetings.
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