US DOLLAR STEADIES AS EUROPEAN BOND MARKET JITTERS PERSIST

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  • The US Dollar trades in the green against most peers, with single exceptions for Central European currencies. 
  • France’s political uncertainty continues to weigh on the country’s bonds and stocks.  
  • The US Dollar index trades above 105.50 ahead of a soft Monday opening. 

The US Dollar (USD) trades broadly steady on Monday as risk aversion prevails in markets amid the French political uncertainty. President Emmanuel Macron’s decision to call for snap legislative elections and the possibility of a far-right-dominated parliament spooked investors, who sold French assets on concerns about how Macron would cope with such a scenario. Sovereign bond spreads in Europe are widening even more, signalling a bond market in distress. Should the bond market continue its rout, the possibility of an intervention by the  European Central Bank (ECB) shouldn’t be ruled out in order to keep the European bond market cohesive and in sync with its monetary policy. 

On the economic data front, a very quiet start for this week from the US perspective with some lighter data ahead. Pivotal elements to look forward to are the Retail Sales on Tuesday and the Purchasing Managers Index (PMI) numbers on Friday. Traders will need to assess what will get priority: softer US data which would see an easing US Dollar, or will it be again the European political turmoil which would rather see US Dollar strength. 


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