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What’s happening: The US dollar index moved lower on Monday as investors assessed the latest economic reports.
What happened: The euro had come under pressure last week on concerns around a budget crisis in France.
The euro rebounded on Monday from a more than one-month low last week following the political turmoil in Europe.
Why it matters: Data released on Friday showed US import prices declined for the first time in five months in May. The US Federal Reserve announced its updated views, which signalled only one rate cut this year, according to the median forecast from all central bankers.
European forex markets remained under pressure last week after French President Emmanuel Macron called for a snap parliamentary election, following significant gains by the far right in a European Union vote.
Investors grew concerned about the risk of a budget crisis in the second largest economy in the Eurozone. Despite a sharp sell-off in the French financial markets late last week, ECB policymakers indicated they had no plans of emergency purchases of French bonds. The risk premium investors were willing to pay to hold French government bonds over Germany’s bonds rose to its highest since 2017.
Some weakness in the US dollar provided a boost to the EUR/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.2% to 105.32 on Monday.
The EUR/USD pair gained around 0.3% to reach 1.0735 on Monday, after falling to a six-week low of $1.066775 last week.
The GBP/USD pair gained more than 0.1% to 1.2704, after hitting a one-month low of 1.26575 earlier in the session, as investors waited for the Bank of England’s interest rate decision. Markets widely expect the BoE to keep its benchmark rates unchanged at least until its August meeting.
The Japanese yen remained close to a 34-year low versus the dollar. The USD/JPY pair added around 0.2% to 157.74 on Monday.
What to watch: Investors await the release of economic reports on retail sales, industrial production and business inventories from the US today. Retail sales in the US, which were flat in April, are expected to grow by 0.2% in May. Analysts expect industrial production to increase 0.3% in May, following an unchanged reading in April, while total business inventories are projected to grow by 0.3% in April, after contracting 0.1% in March.
Context: European markets closed slightly higher on Monday as investors assessed the latest economic data.
Details: Data released on Monday showed Eurozone’s wages grew 5.3% year-over-year during the first quarter, the most since the final quarter of 2022. This was higher than the previous quarter’s 3.2% rise. Hourly labour costs rose by 5.1% year-over-year in the first quarter, recovering from the 3.4% gain in the prior period. The figure came in higher than the preliminary reading of 4.9%.
Italy’s inflation rate accelerated by 0.2% in May, while the consumer price index rose 0.8% on an annualised basis.
The STOXX Europe 600 Index gained 0.09% to close at 511.49 on Monday, following a volatile morning session. Travel shares climbing around 1.6% during the session, with healthcare stocks being among the worst performers, down 1%.
France’s CAC 40 gained 0.91% to close at 7,571.57 on Monday, after shedding more than 6.2% last week to record its worst weekly loss since March 2022 due to the political turmoil in Europe. Germany’s DAX 40 gained 0.37% to close at 18,068.21.
London’s FTSE 100 slipped 0.06% to settle at 8,142.15 ahead of the Bank of England’s interest rate decision on Thursday. The central bank is widely expected to keep rates unchanged at 5.25% this week.
What to watch: Investors await the release of economic data on inflation rate and ZEW indicator of economic sentiment from the Eurozone today. Analysts expect Eurozone’s inflation rate to increase for the first time in five months to 2.6% in May, compared to 2.4% in the prior month. The ZEW Indicator of Economic Sentiment for the Eurozone, which increased by 3.1 points to 47 in May, is expected to rise to 47.8 in June.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.49%, 0.77% and 1.24%, respectively.
Russian President Vladimir Putin will arrive in Pyongyang for a two-day visit today to deepen the relationship with North Korea. The news sent the RUB/USD slightly higher in forex trading this morning.
Singapore’s NODX (non-oil domestic exports) slipped 0.1% year-over-year in May, after a 9.6% decline in April. The NODX declining for the fourth straight month exerted pressure on the SGD/USD forex pair.
Peru’s GDP rose by 5.28% year-over-year in April, after a 0.28% contraction in the prior month. The region’s economic activity growing the most since September 2021 sent the PEN/USD pair higher in forex trading this morning.
US NY Empire State Manufacturing Index improved to -6 in June, from May’s reading of -15.6. The latest reading also topped market estimates of -9, which sent the Nasdaq 100 higher by over 1% on Monday.
Qatar’s annual inflation rate accelerated to 0.93% in May, from 0.71% in April. However, the QAR/USD rose in forex trading this morning.
Germany’s ZEW economic sentiment index and ZEW current conditions subindex, Mexico’s GDP aggregate demand and consumer spending, US Redbook index, capacity utilization rate, manufacturing production, net long-term TIC flows, net purchases of US treasury bonds and notes, net treasury international capital flows and API crude oil stocks change, as well as China’s foreign direct investment.
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