On Monday, the euro climbed as markets turned their focus towards the tool of the European Central Bank (ECB) for fighting fragmentation in the bloc. Meanwhile, France found itself in a political gridlock, as President Emmanuel Macron was unable to secure the absolute majority in the elections over the weekend for controlling the parliament.
The Election Results
The Ensemble alliance of the French President did well in terms of the National Assembly, as they got the majority required there, but the same could not be said for the parliament. However, traders and analysts were not focusing much on the results of the election.
Instead, they were more interested in the attempts of the European Central Bank for containing the borrowing costs in the south and the monetary policy outlook globally. Market analysts said that the euro zone would undoubtedly benefit from a Macron majority in the parliament and his presidency, it is applicable in the long term and will not have an immediate impact on markets.
They said that the two things that could affect the euro for now were the monetary policy down the road and the fragmentation tool that the ECB had talked about.
Fragmentation Tool
The ECB had been forced to schedule an emergency meeting last week due to the bond markets’ condition. In the said meeting, the central bank had promised an anti-fragmentation tool that would provide the southern rim of the bloc with the fresh support it needs. Meanwhile, the bank is also schedule to hike up its interest rates, which it has not done since 2011.
The euro had climbed by 0.4% against the dollar, which brought it to $1.05315. As far as the greenback is concerned, it did not change much against the yen after reaching a value of 135.44 in the Asia-Pacific trading hours.
There was a 0.3% decline in the dollar index, which measures the currency against a basket of its peers, including the yen and the euro. It was down to 104.41, but quite close to 105.79, which is a high of two decades that it had hit on Wednesday last week when the US Federal Reserve had announced their 75 basis points interest rate hike for fighting inflation. Jerome Powell, the chairman of the Fed, is scheduled for testifying before the House and the Senate this week on Wednesday and Thursday.
Risk Sensitive Currencies Climb
The New Zealand and Australian dollars climbed 0.6% and 0.7%, respectively, as risk sentiment became stable, after experiencing a great deal of volatility in the previous week. There was a 0.6% decline in the US dollar against the Swiss franc, while a 0.4% increase was recorded in the Sterling as it climbed to $1.2273.
There was not a lot of change in the world’s top cryptocurrency Bitcoin, as it was trading at a value of $20,663. The world’s first crypto had fallen to a major low over the weekend of about $17,592.78, which has not been seen since the end of 2020.