Euro Up, Yen Down After French Vote

1 Jul 2024 , 09:35 AM

The euro climbed on Monday after the first round of France’s snap election put the far-right in pole position, albeit by a lesser margin than expected, while a downgrade to Japan’s first-quarter growth estimates sent the yen down.

Marine Le Pen’s far-right National Rally (RN) party won the first round of France’s legislative elections on Sunday, according to exit polls, however observers highlighted that the party received a smaller share of the vote than some polls predicted.

The euro, which has declined over 0.8% since President Emmanuel Macron called the election on June 9, was last 0.24% higher at $1.0737, after reaching a more than one-week high of $1.0749 earlier in the session.

The euro’s surge pulled the dollar a little lower against a basket of currencies, but the greenback was also hurt by data on Friday showing U.S. inflation fell in May, solidifying views that the Federal Reserve will begin cutting interest rates later this year.

According to the CME FedWatch tool, the market now expects a 63% chance of a Fed cut in September, up from an even chance a month earlier.

Sterling rose 0.01% against the dollar to $1.2647, while the Australian dollar rose 0.04% to $0.6673.

The New Zealand dollar crept up 0.14% to $0.6099. The dollar index fell 0.02%, to 105.70.

The yen struggled to gain ground against a generally weaker dollar, closing 0.05% lower at 160.93 per dollar.

The Japanese yen reversed early gains in the session as updated statistics revealed that the country’s GDP contracted more than previously estimated in the first quarter.

This might lead to a reduction in the Bank of Japan’s growth predictions in new quarterly projections coming later this month, affecting the date of the next interest rate hike, analysts said.

Elsewhere in Asia, the Chinese yuan, which has also been hit by sharp interest rate differentials with the United States, was recently 0.02% higher at 7.2981 per dollar on the offshore market.

China’s industrial output dipped for the second consecutive month in June, while services activity fell to a five-month low, according to an official survey released on Sunday, reinforcing calls for additional stimulus as the economy fights to recover.

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