Investing.com – The US dollar was steady in early European trading on Monday ahead of key inflation data, while the euro rose higher as traders digested French parliamentary election results.
At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading largely flat at 104.577, consolidating after a nearly 1% slump last week.
The dollar stabilizes ahead of the CPI release
The dollar has stabilized at the start of the new week, having fallen behind following surprisingly soft US data on Friday, raising expectations for the Federal Reserve to cut interest rates soon.
According to CME Group’s (NASDAQ:) FedWatch Tool, traders currently estimate about 76% odds for a rate cut at the Fed’s September meeting, up from 64% a week ago.
More clues about the likely path of US interest rates will emerge this week, with the release of key data and a two-day testimony from the Federal Reserve chairman before both the Senate and House of Representatives.
“This week will be a hot one for the US macroeconomy, with the June CPI report due on Thursday. We expect core pressures to be 0.2% month-on-month, in line with consensus, which should be enough to keep markets betting on a rate cut in September,” ING analysts said in a note.
The euro looks to France
rose 0.1% to 1.0842, with the euro recovering from early losses as traders digested the implications of Sunday’s second round of parliamentary elections in France.
The left-wing New People’s Front emerged as the dominant force in the National Assembly after Sunday’s elections, as a wave to the left prevented the far-right National Rally from gaining power as expected after the first round of elections the weekend before.
However, France now faces a hung parliament, ushering in a period of political instability in the eurozone’s second-largest economy.
“Our rates team still sees some risks of easing as a hung parliament will struggle to achieve any fiscal consolidation and there are some risks associated with a potential left-wing government,” ING said.
rose 0.1% to 1.2818, rising to levels seen for the first time since June 12, continuing the positive tone generated by the opposition Labor party winning a huge majority in Great Britain’s general election Britain, potentially ending the Conservative Party’s volatile 14-year rule.
“We doubt that the budget outlook will have an impact on the pound yet, while developments in French politics, US macroeconomic expectations and Bank of England interest rate expectations will remain the biggest drivers of GBP,” he said. ING.
“BoE officials will return to public speaking after a quiet period before the election, with hawkish outsider Jonathan Haskel making remarks today, and Huw Pill and Catherine Mann (another hawk) speaking on Wednesday.”
The yen is moving away from a 38-year low
In Asia, it traded 0.2% higher at 161.05, with the yen moving lower on Monday but still retreating from its weakest level in 38 years after data pointed to some strengthening in the economy.
Data showed that average Japanese cash earnings grew at the fastest pace in more than three decades
traded marginally higher to 7.2702, with the yuan hovering around a seven-month low.
