Euro Climbs to Near 1.1000 Before Sunday Vote as Dollar Drops

  • Jobs data support Fed contention of transitory slowdown in 1Q
  • Euro-yen at 2017 high seen as safer wager on France election

The euro came within a hair of 1.1000 versus the greenback as the Bloomberg dollar spot index fell slightly ahead of the final round of the French presidential election Sunday.

The common currency rose to its highest since Nov. 9 as traders focused on the French presidential race. The euro has risen more than 1 percent this week in the aftermath of a debate between the candidates and some expect those gains may continue after election results are released Sunday evening in France. The euro gapped higher after the first round of voting narrowed the field of candidates to just centrist Emmanuel Macron and right-wing rival Marine Le Pen. The last opinion polls before a pre-election blackout continue to show Macron with a solid lead.

  • The dollar relinquished modest gains to trade slightly lower after the U.S. April employment report appeared to support the Federal Reserve’s notion that weak economic growth in the first quarter was “transitory. The jobs outlook is likely to keep the Fed on track for two more rate hikes this year, analysts said. The economy added a robust 211k non-farm jobs in April after the March jobs total was revised down to 79k from a previously reported 98k. The April unemployment rate unexpectedly fell to 4.4% from 4.5%. Earlier in the week, officials left rates and policies on hold at the conclusion of the FOMC meeting and said that the labor market has “continued to strengthen even as growth in economic activity has slowed”
  • In Friday trading, USD losses were exacerbated by a rebound in the Canadian dollar and some emerging-market FX as crude oil and commodities bounced back from a precipitous overnight decline, boosting resource-sensitive currencies. The dollar is down ~0.1% against a basket of currencies
  • Fed Chair Janet Yellen and Vice Chair Stanley Fischer didn’t comment on the U.S. economic outlook in separate speeches; St. Louis Fed President James Bullard said in an interview with Reuters that he wouldn’t oppose one more rate hike this year. San Francisco Fed President John Williams said the Fed should rethink its price policy before the next crisis. Bullard and fellow regional Fed Presidents Eric Rosengren and Charles Evans spoke on a panel and advocated trimming the central bank’s balance sheet
  • EUR/USD traded to a fresh six-month high at 1.0999, closing in on the 1.1000 level not seen since Nov. 9. Offers ahead of that level capped euro overnight, though supply likely diminished after large option strikes rolled off. EUR is underpinned by demand for EUR/JPY, which rose to a fresh 2017 high, said traders who asked not to be identified because they are not authorized to speak publicly. EUR/JPY may be seen as a safer way to position for the French election as traders remain wary of selling USD given the Fed’s intentions to raise rates
  • USD/JPY rose to a fresh high at 112.77 after the jobs data, reversing an overnight drop as weak USD longs threw in the towel, beating a hasty retreat from a six-week high above 113.00 seen Thursday. Offers to sell USD/JPY are in place above 113.00 while bids are positioned under the overnight low of 112.09, traders said
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