Euro Rises after France's First-round Vote; Yen Fragile

The euro rose after the first round of France's snap election put the far-right in pole position. Reuters
The euro rose after the first round of France's snap election put the far-right in pole position. Reuters
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Euro Rises after France's First-round Vote; Yen Fragile

The euro rose after the first round of France's snap election put the far-right in pole position. Reuters
The euro rose after the first round of France's snap election put the far-right in pole position. Reuters

The euro rose on Monday after the first round of France's snap election put the far-right in pole position, though by a smaller margin than projected, while the yen struggled to break away from a near 38-year low.
Marine Le Pen's far-right National Rally (RN) party won the first round of France's parliamentary elections on Sunday, exit polls showed, although analysts noted the party won a smaller share of the vote than some polls had initially projected.
The euro, which has fallen some 0.8% since President Emmanuel Macron called the election on June 9, was last 0.4% higher at $1.0756, after having touched two-week top earlier in the session.
"They (RN) have actually performed a little bit worse than what was expected," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
"As a result of that, we saw the euro rise modestly in early Asian trade just because we might actually get less fears of more expansionary and unsustainable fiscal policy if the far-right party did a little bit worse."
The rise in the euro sent the dollar a touch lower against a basket of currencies, though the greenback was also reeling from data on Friday that showed US inflation cooled in May, cementing expectations the Federal Reserve will begin cutting interest rates later this year.
Market pricing now points to about a 63% chance of a Fed cut in September, as compared to a 55% chance a month ago, according to the CME FedWatch tool.
Against the dollar, sterling rose 0.11% to $1.2659, while the Aussie dipped 0.07% to $0.66655.
The New Zealand dollar edged 0.12% higher to $0.6098. The dollar index was last 0.11% lower at 105.61, having earlier hit a one-week trough.
"Should inflation continue to behave itself, and incoming data fall in line with the FOMC's forecasts, through the summer, the first 25bp cut remains on the cards as soon as September," said Michael Brown, senior research strategist at Pepperstone.

The yen struggled to gain ground against a broadly weaker dollar and was last 0.1% lower at 161.03 per dollar, standing just a whisker away from a 37-1/2-year low of 161.27 hit on Friday.
The Japanese currency had reversed early gains in the session following revised data that showed its economy shrank more than initially reported in the first quarter.
Separate data on Monday also showed the business mood in Japan's service-sector soured in June as the lower yen pushed costs higher, offsetting a big lift in factory confidence and pointing to consumption weakness.
The yen has already fallen more than 12% this year as it continues to be weighed down by stark interest rate differentials between the US and Japan, with its latest decline to the weaker side of 160 per dollar keeping investors on heightened alert for any intervention from Japanese authorities to prop up the currency.
Elsewhere in Asia, the Chinese yuan - also a victim of stark interest rate differentials with the US - fell a marginal 0.04% to 7.3204 per dollar in the offshore market.
The onshore yuan last stood at 7.2679 per dollar.
The Chinese currency drew some support from a private sector survey which showed factory activity among smaller Chinese manufacturers
grew at the fastest pace since 2021 thanks to overseas orders.
That came after official data over the weekend revealed China's manufacturing activity fell for a second month in June while services activity slipped to a five-month low.
"The PMIs for June were mixed but on balance suggest that the recovery lost some momentum last month," said economists at Capital Economics.
"We think economic activity will continue to hold up relatively well in the coming months. While the latest property stimulus has done little to boost new home sales, fiscal stimulus and strong exports should continue to support growth, at least in the near term."



Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
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Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon

The Federal Reserve cut its key interest rate Thursday by a quarter-point in response to the steady decline in the once-high inflation that had angered Americans and helped drive Donald Trump’s presidential election victory this week.
The rate cut follows a larger half-point reduction in September, and it reflects the Fed’s renewed focus on supporting the job market as well as fighting inflation, which now barely exceeds the central bank’s 2% target, The Associated Press reported.
Asked at a news conference how Trump's election might affect the Fed's policymaking, Chair Jerome Powell said that "in the near term, the election will have no effects on our (interest rate) decisions.”
But Trump’s election, beyond its economic consequences, has raised the specter of meddling by the White House in the Fed’s policy decisions. Trump has argued that as president, he should have a voice in the central bank’s interest rate decisions. The Fed has long guarded its role as an independent agency able to make difficult decisions about borrowing rates, free from political interference. Yet in his previous term in the White House, Trump publicly attacked Powell after the Fed raised rates to fight inflation, and he may do so again.
Asked whether he would resign if Trump asked him to, Powell, who will have a year left in his second four-year term as Fed chair when Trump takes office, replied simply, “No.”
And Powell said that in his view, Trump could not fire or demote him: It would “not be permitted under the law,” he said.
Thursday’s Fed rate cut reduced its benchmark rate to about 4.6%, down from a four-decade high of 5.3%. The Fed had kept its rate that high for more than a year to fight the worst inflation streak in four decades. Annual inflation has since fallen from a 9.1% peak in mid-2022 to a 3 1/2-year low of 2.4% in September.
When its latest policy meeting ended Thursday, the Fed issued a statement noting that the "unemployment rate has moved up but remains low,” and while inflation has fallen closer to the 2% target level, it “remains somewhat elevated.”
After their rate cut in September — their first such move in more than four years — the policymakers had projected that they would make further quarter-point cuts in November and December and four more next year. But with the economy now mostly solid and Wall Street anticipating faster growth, larger budget deficits and higher inflation under a Trump presidency, further rate cuts may have become less likely. Rate cuts by the Fed typically lead over time to lower borrowing costs for consumers and businesses.
Powell declined to be pinned down Thursday on whether the Fed would proceed with an additional quarter-point rate cut in December or the four rate cuts its policymakers penciled in for 2025.