Market Analysis

Euro Set for Steep Weekly Decline Amid Political Turmoil; Dollar Holds Steady

Amos Simanungkalit · 14 Jun33K Views

The U.S. dollar saw a slight decline on Friday, alongside the euro which also weakened significantly, facing substantial weekly losses amid ongoing political instability in Europe.

At 04:20 ET (08:20 GMT), the Dollar Index, measuring the dollar against a basket of major currencies, was down 0.1% at 105.125.

Despite minor setbacks, the dollar is poised for modest gains this week following the Federal Reserve's decision to maintain the funds rate at 5.25%-5.5% and reduce projected rate cuts for the year from three to one, reflecting easing inflation pressures highlighted by weaker-than-expected consumer and producer prices in the U.S. Additionally, unemployment claims rose to a 10-month high last week.

Goldman Sachs anticipates the Fed may still cut rates in September and December, citing inflation forecasts slightly below the Fed's projections.

Meanwhile, the euro slipped 0.3% to 1.0708 against the dollar, set for weekly losses of approximately 0.8%. Political turmoil in Europe intensified after far-right parties gained ground in recent European Parliament elections. French President Emmanuel Macron responded to losses by proposing snap elections amidst efforts by leftist parties to form coalitions, potentially undermining Macron's party further.

GBP/USD dipped 0.2% to 1.2729, despite expectations of delayed Bank of England rate cuts following stronger-than-anticipated inflation data in Britain last month.

In Asia, USD/JPY rose 0.3% to 157.56 after the Bank of Japan opted to maintain rates and signaled plans to potentially reduce bond purchases starting July, following consultations with market participants. Conversely, USD/CNY climbed 0.1% to 7.2557, nearing a seven-month high amid strained sentiment towards China due to EU tariffs on Chinese electric vehicle imports.