The euro’s relief rally from the French presidential result faded in European trading on Monday as profit taking set in, while the safe-haven yen recovered from its earlier weakness. The US dollar also gave up its earlier gains versus the yen but was firmer when measured against a basket of currencies.
The single currency hit a 6-month high of 1.1022 dollars at the Asian open but had retreated to 1.0940 by late European session. A win for the centrist candidate Emmanuel Macron in France’s hotly contested presidential election had already been largely priced in by the markets, hence the euro’s limited gains. With the crucial vote out of the way, attention now turns to Macron’s economic agenda and whether his newly founded party will be able to win enough seats at next month’s legislative election to implement much-needed reforms.
Positive data out of the Eurozone failed to halt the euro’s slide. Industrial orders in Germany increased by 1% month-on-month in March, in line with expectations. The Eurozone sentix index was also released today and rose to 27.4 in May – the highest since July 2007. It compares with forecasts of 25.0 and 23.9 in April.
The only major data out of the UK today were housing data. UK house prices according to Halifax fell by 0.1% m/m in April, missing estimates of a 0.2% increase. However, the pound held near the 7-month high of 1.2990 dollars it touched earlier in the day as the British currency continued to be lifted by the strong lead of Prime Minister Theresa May’s Conservative party in the polls ahead of the June election. Also in focus for sterling is the Bank of England’s monetary policy meeting on Thursday where the latest quarterly projections will also be published.
The dollar meanwhile moved broadly higher against other currencies as it continued to receive support from Friday’s jobs report, which showed a bigger-than-expected rise in non-farm payrolls in April. The dollar index was up by about 0.4% on the day at 99.03, but against the yen, the greenback slipped from the near 2-month high of 113.10 yen it hit at the start of trading today to stand around 112.75 in late session.
Fed policymakers speaking today gave mixed views on the policy outlook, with Cleveland Fed President Loretta Mester sounding typically hawkish but St. Louis Fed President James Bullard was much more cautious. Speaking in Chicago, Mester warned against the Fed falling behind the curve, but Bullard, who was speaking in Atlanta, said the US economy was in a low-growth state and that the current rate setting was appropriate.
The Canadian dollar fell back on Monday following Friday’s strong surge on the back of the sharp rebound in crude oil prices. The loonie found little support from better-than-expected housing starts in Canada, which rose by 214k in April, though this was down on the prior month. The US dollar was again testing the C$1.37 level in late European trading today, having hit a more than 14-month high of C$1.3793 last week.
The loonie’s dip comes despite oil extending its gains on Monday on signs that OPEC is considering extending the output deal by a further nine months or more rather than the expected six months. WTI oil and Brent crude were about 0.6% higher at $46.53 and $49.45 a barrel respectively in late session.
The Swiss franc was a surprise underperformer as, unlike the yen and gold, it failed to benefit from the recovery in safe-haven demand. The dollar stood 1% higher at 0.9975 francs, while the euro was up 0.5% at 1.0910 francs.