Euro Declines Following French Election Results

The euro experienced a slight decline on Monday, coming off overnight lows against the dollar. This movement followed the results of the French election, which resulted in a hung parliament.

U.S. Dollar Rises After Payroll Data

The U.S. dollar saw a modest increase from a more than three-week low after the release of U.S. payroll data on Friday. This data has bolstered expectations that the Federal Reserve will soon begin cutting interest rates.

Impact of French Election on the Euro

On Monday, French President Emmanuel Macron requested that his prime minister remain in their position temporarily, pending challenging negotiations to form a new government. This follows a surprising left-wing surge in the elections that resulted in a hung parliament.

Garth Appelt, Head of Foreign Exchange & Emerging Markets Derivatives at Mizuho Americas, noted, "We're still waiting to see if the coalition can get the 240 to 250 lawmakers together to have any semblance of a, what is it, I think in France, a working government. We're in wait-and-see mode there."

Concerns about a potential French exit from the eurozone were eased after Marine Le Pen’s National Rally failed to secure a majority, according to Helen Given, FX trader at Monex USA in Washington DC.

Current Euro and Dollar Exchange Rates

As of the latest updates, the euro was down 0.11% at $1.0824, having briefly reached $1.0845, its highest since June 12. It dipped to a low of $1.07915 earlier in the day. Meanwhile, the dollar index, which measures the U.S. currency against a basket of six major rivals, gained 0.04% to 104.99, after previously dropping to 104.80, the lowest since June 13.

U.S. Economic Data and Fed Speculations

The dollar's rise on Friday followed the release of June's employment report, which showed solid job gains. However, details revealed that government and healthcare services hiring accounted for most of the increase, and the unemployment rate hit a 2-1/2-year high of 4.1%. Additionally, the economy created 111,000 fewer jobs in April and May than previously estimated, and annual wage growth was the slowest in three years.

Investors are closely monitoring Federal Reserve Chairman Jerome Powell’s upcoming testimony before Congress on Tuesday and Wednesday. Traders are looking for indications of a potential rate cut, with the CME Group's FedWatch Tool showing a 76% likelihood of a September rate cut and a subsequent cut expected by December.

Other Currency Movements

The dollar gained slightly against the Japanese yen, buoyed by data showing that Japanese workers' average base pay rose 2.5% in May, the fastest pace in 31 years. The Bank of Japan noted that wage hikes are becoming more widespread, signaling progress toward its 2% inflation target. This development may prompt the central bank to consider raising interest rates at its upcoming meeting.

Sterling remained steady after earlier reaching a 3-1/2 week high against the dollar and the euro. The British currency has been boosted by the Labour Party's recent election victory, ending 14 years of Conservative rule.

Meanwhile, the Australian dollar fell 0.18% against the greenback, despite reaching its highest level since January 3 earlier in the day. In the cryptocurrency market, Bitcoin fell 0.08% to $56,312.