DXYN - Week Ahead: Political Anxiety Runs High Giving The Dollar A Lift

2024-06-15 11:10:00 ET

Summary

• Despite softer US inflation readings and lower interest rates, the US dollar performed well against the euro, sterling, and yen.
• Political anxiety in France and the UK, along with economic highlights from central bank meetings, impacted currency markets.
• The Australian dollar, Chinese yuan, Japanese yen, euro, Canadian dollar, and Mexican peso all faced challenges and fluctuations in the foreign exchange market.

Under other circumstances, the softer than expected US inflation readings and the subsequent sharp drop in US interest rates would have weighed on the US dollar. Instead, the greenback managed to do well, especially against the euro, sterling, and Japanese yen.

The 0.6% rise in the Dollar Index ( USDOLLAR , DXY ) was the biggest gain in two months. The Fed's hawkish hold, with the median dot shifting to one cut this year from three in March (and last December) means that some other central banks may cut rates one or two more times before the Fed cuts. In addition, political anxiety stemming from the snap French election for which President Macron's party and allies could come in third place in the first round has seen not only the French premium widen over Germany but others in the European periphery saw the markets demand a greater premium....

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