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Jun 10 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Lowest In A Month On EU Elections, US Jobs Data

By Randolph Donney  —  Jun 10 - 01:55 PM

The dollar index rose 0.27% on Monday with the help of euro weakness following EU election news that led to the announcement of a snap French election and that lifted risk premia for the region.

The news hit a forex market already under the dollar-positive influence of surprisingly strong U.S. payrolls growth reported on Friday, which came a day after the ECB cut interest rates.

Those factors outweighed Monday's above-forecast EU Sentix investor morale index, which showed its first positive reading since February 2022.

French 2-year and 10-year government debt yields rose 6bp and 12bp, with derisking pushing 4bp and 12bp BTP yield increases.
Two-year and 10-year bund yields were flat and up 5bp.
Treasury yields rose 2bp and 5bp, consolidating Friday's sharp post-jobs data surge.

EUR/USD was last down 0.4%, having fallen as far as 1.0733, its lowest since a pullback low of 1.0724 hit on May 9.
Whether the retreat persists toward 2024's 1.060125 EBS low may hinge on U.S. CPI and the Fed on Wednesday, including policymakers' projections and Chair Jerome Powell's news conference.
Political fallout in the EU, particularly in France and Italy ahead of the June 13-15 G7 summit in Italy, will also be watched.

USD/JPY rose 0.17% in subdued follow-through from Friday U.S. payrolls reaction, edging closer to last week's 157.48 high and the late May top at 157.715 by May 1's 157.99 peak that preceded that day's BoJ intervention rout to 153.

Clearing those hurdles may take an assist from hawkish CPI data and Fed events on Wednesday, with futures still pricing in slightly better-than-even odds of a September rate cut and perhaps one more by December versus the BoJ priced to hike 25bp by year-end, likely beginning in July.

Beyond Wednesday the focus will be on the BoJ meeting Friday for signals about longer term plans for reducing usage of JGB purchases, then U.S. retail sales on June 18.

Sterling rose 0.09% after rebounding from 1.26885 lows near the prior two weeks' lows and the April-May uptrend line, aided by a 0.5% drop in EUR/GBP to its lowest since August 2022.
Tuesday's UK jobs data is the top watch before U.S. CPI and the Fed on Wednesday, with BoE and Fed rate cut expectations pretty similar.

Aussie rose 0.37% after nearing key 55-day moving average support and amid higher commodity prices.

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Refinitiv IFR Research/Market Commentary


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