Dollar near one-month high vs Euro ahead of inflation data

12 Jun 2024

The Dollar remained near a one-month high against the Euro on Tuesday, and hit a one-week top against the Yen, ahead of key US inflation data and Fed interest rate forecasts.

Following unexpectedly strong domestic jobs data on Friday, higher Treasury yields provided support to the US currency. This led to a significant reduction in expectations for Federal Reserve rate cuts this year.

Investors anticipate the Bank of Japan to announce its policy decision on Friday. There's speculation that the central bank might reduce its monthly government bond purchases as soon as this meeting.

However, the substantial yield gaps with the US have kept the Yen under pressure.

At the time of writing the Dollar was up 0.15% to 157.275 Yen, after previously touching its highest since 3rd June at 157.39, Reuters reports.

Whereas the Euro was flat at $1.0764, after falling to a low of $1.0731 on Monday, following gains made by far-right parties in the European Parliament elections, alongside French President Emmanuel Macron's announcement of a snap election.

“Worries about the prospect of gains for the populist-right in Europe have usually been associated with Euro-Dollar weakness, as in 2017,” said Thierry Wizman, global forex and rates strategist at Macquarie.

“We expect some of the same pressure now too. It's one reason why we stick to our view that Euro-Dollar gets to 1.05, and lingers there.”

The far-right National Rally was predicted on Monday to emerge victorious in a snap election in France. However, they were projected to fall short of securing an absolute majority in the first opinion poll released after Macron's unexpected decision to dissolve parliament.

Elsewhere, Sterling fell 0.1% to $1.2714 after the UK’s unemployment rate increased in April, despite another month of robust wage growth.

Whilst the Dollar index, measuring the greenback against six major peers, was little changed at 105.19, after hitting 105.39 on Monday for the first time since mid-May.