Dollar Pares Losses Ahead of First French Presidential Debate

  • Euro not in the clear as elections, ECB policy cloud view
  • GBP drops to daily low after Article 50 call set for March 29

The dollar pared its losses for the day though remained on track for a fourth session of declines, putting the currency on the cusp of relinquishing all gains since Donald Trump was elected president.

The Bloomberg dollar index fell slightly after earlier declining as much as 0.3% amid muted flows. Traders attempted to balance a shifting European political scene and conflicting European Central Bank signals with a less hawkish perception of U.S. monetary policy even after Federal Reserve Chair Janet Yellen’s assertion that two further 2017 hikes are likely. Traders will monitor the French presidential debate late Monday and Yellen’s speech Thursday for fresh cues.

  • The dollar dropped to its lowest since Nov. 11, extending losses that began moments after the Fed hiked March 15. Yet its fall was outpaced by the decline in yield on the 10-year Treasury, perhaps indicating some dollar resilience
  • The French presidential debate will feature the 5 leading candidates, and will be watched for shifts in the race between centrist Emmanuel Macron and populist Marine Le Pen. A further six candidates were excluded from Monday’s debate, which takes place at 9pm Paris time.
  • At the same time, the unanimous election of Martin Schulz as head of Germany’s Social Democratic party reminds of the likely contentious challenge to Angela Merkel in the Sept. 24 general election in Germany. While the bloom may be off the dollar, the case for building euro longs is not yet compelling, a trader in London said.
  • Ahead of the French presidential debate, EUR is lower vs a majority of its G-10 peers while the Bloomberg euro index is little changed; the euro index last week stalled near technical resistance from its 200-DMA.
  • EUR/USD orbited 1.0750 for most of the session before dropping past the 1.0732 low from overnight to a new low of 1.0725; bids to buy EUR are in place ahead of 1.0700 while offers are positioned above 1.0800 and extend to 1.0830, traders in Europe and Asia said; EUR/USD has additional support at Thursday’s 1.0706 low
  • GBP/USD fell to a fresh low on the day at 1.2335 and remained close by after Britain’s envoy to the EU, Tim Barrow, informed EU President Donald Tusk on Monday of PM Theresa May’s plan to trigger Article 50 proceedings on March 29
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