Stéphane Rebaud and Gertrude Chávez-Dreyfus
MILAN/NEW YORK (Reuters) – The euro fell on Monday against a strong U.S. dollar on growing concerns of a possible government collapse in France, which would halt plans to rein in a growing budget deficit.
Meanwhile, the greenback edged higher after strong U.S. manufacturing data from both the Institute for Supply Management and S&P Global reports, raising the prospect that the Federal Reserve could hold off on interest rate cuts at its policy meeting later this year. month.
The dollar’s gain on Monday followed the US unit’s first weekly drop since September 2023 on Friday as the so-called Trump trade fizzled out.
In Europe, the risk premium for investors to hold French debt rather than benchmark German bonds jumped after France’s far-right National Rally President Jordan Bardella said his party was likely to support a no-confidence vote in the coming days, if not there will be a “last” minute miracle.”
Leading RN lawmaker Marine Le Pen has given Prime Minister Michel Barnier until Monday to meet her party’s budget demands.
The euro fell 1% to $1.0469, marking its biggest daily drop since early November.
“The common currency is under pressure as French political dysfunction worsens and intra-euro spreads widen, but it’s important to note that European yields are generally lower – French rates are simply falling less than their peers,” said Karl Chamota, chief market strategist at Corpay in Toronto.
“This is not a repeat of the euro crisis, but simply a reflection of France’s growing economic problems.”
Some analysts still believed that Le Pen did not want to overthrow the government, because she could be blamed for the financial and economic crisis in France.
The France-to-France yield spread – a measure of investors’ demand to hold French debt – rose 7.6 basis points to 87.3 basis points after reaching 90 basis points last week, the highest level since 2012 during the zone’s sovereign debt crisis euro.
TRUMP’S SHIFT SUPPORTS THE DOLLAR
Data on Monday again showed a resilient US economy, with US manufacturing activity improving in November, orders rising for the first time in eight months and factories facing much lower input prices.
The Institute for Supply Management’s manufacturing PMI edged to 48.4 last month from 46.5 in October, the lowest level since July 2023.
The final S&P Global manufacturing PMI also rose to 49.7 from an initial estimate of 48.8.
According to CME FedWatch, after the US data, the markets reduced the probability of easing by 25 bps. this month to 62% from 66% late Friday. At the same time, futures on the rate increased the odds of a Fed pause to 38% from 34% on Friday.
The greenback earlier rallied as President-elect Donald Trump signaled a departure from his previous advocacy of weakening the dollar by demanding that BRICS members pledge not to create a new currency or support another currency.
The Kremlin said on Monday that any US attempt to force countries to use the dollar would backfire.
The – a measure of its value relative to a basket of its major peers – rose 0.6% to 106.71.
It quickly fell to a 4-1/2-month low of 7.2871 per dollar.
Key to the rate outlook will be the November payrolls report due on Friday, where average forecasts favor a rise of 195,000 after October’s weather report and strikes, which may also be revised down given the low response to that survey.
The unemployment rate is expected to rise to 4.2% from 4.1%, which should allow the Federal Reserve to cut rates by 25 basis points on December 18.
The dollar was up 0.1% against the yen at 149.87, having lost 3.3% last week in its worst period since July. Support is around 149.47 with resistance at 151.53. Over the weekend, Bank of Japan Governor Kazua Ueda said the next interest rate hike was “closer in the sense that economic data is on track,” following figures showing a pick-up in inflation in Tokyo in October.
Currency
rate
prices for
2
december
04:01
evening GMT
RIC Description Last US YTD Percentage High Low
on Close Change bid rate
Previous
session
Dollar 106.67 106.04 0.6% 5.23% 106.73 106.
index 02
1.0467 EUR/USD 1.0576 -1.03% -5.17% 1.0587 USD 1.0 USD
ar 462
Dollar/Ye 149.9 149.49 0.28% 6.28% 150.755 149.
p. 725
Euro/yen 1.0467 158.35 -0.91% 0.84% 158.64 156.
8
Dollar/Sw 0.8879 0.8813 0.74% 5.49% 0.8889 0.88
issue 14
Sterling/ 1.2624 1.2741 -0.88% -0.76% $1.2745 $1.2
619 dollars
Dollar/Ca 1.408 1.4001 0.56% 6.22% 1.409 1.39
Hope 86
Australian dollar 0.6444 0.6519 -1.1% -5.44% $0.6527 $0.6
445
Euro/Switzerland 0.9291 0.932 -0.31% 0.05% 0.9324 0.92
from 9
Euro/star 0.8289 0.8304 -0.18% -4.38% 0.8305 0.82
ling 71
New Zealand 0.5866 0.5924 -0.94% -7.13% 0.592 $ 0.58
Dollar / Up to 65
ll
Dollar/no 11.1402 11.0181 1.1% 9.92% 11.1578 11.0
Route 626
Euro/Norway 11.6662 11.662 0.04% 3.94% 11.6899 11.6
is 37
Dollar/Sw 11.0273 10.8844 1.31% 9.55% 11.0342 10.8
Eden 868
Euro / Sweden 11.5464 11.521 0.22% 3.78% 11.5488 11.5
on 165
