July 8 (Reuters) – The euro touched a more than
three-week high against the dollar on Monday, recovering
overnight losses as France’s election pointed to a hung
parliament.
The dollar, meanwhile, crept downward, 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.
“If anything, it probably leads to a little bit of
instability in terms of the government structure there now,”
said Brad Bechtel, global head of FX at Jefferies in New York.
So far, however, he noted the market reaction to the election
result has been “relatively subdued”.
The euro was last up 0.04% at $1.0840 and rose as
high as $1.0845, the highest since June 12. It dipped to
$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,
fell 0.12% to 104.82 and got as low as 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 currently set about 77% odds for a rate cut at the
Fed’s September meeting, up from 65% a week ago, according to
the CME Group’s FedWatch Tool. A subsequent cut is expected by
December.
The dollar fell against the Japanese yen, reversing earlier
gains. Data on Monday showed 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 30-31.
The dollar was last down 0.08% at 160.59, holding
below last week’s 38-year high of 161.96.
Sterling rose to a 3-1/2 week top versus the dollar and the
euro, building on the gains following the Labour Party’s
landslide election victory last week, which ended 14 years of
Conservative rule. It was last up 0.24% at $1.2838.
The Aussie dollar fell 0.04% to $0.6746, having
earlier reached $0.67615, the highest since Jan. 3.
In cryptocurrencies, bitcoin gained 1.44% to $57,166.
(Reporting By Karen Brettell; Additional reporting by Kevin
Buckland and Amanda Cooper; Editing by Arun Koyyur)
